CSE launches Central Counterparty framework for equity trades

From left: CSE Chief Regulatory Officer Nilupa Perera, Chief Market Operations Officer Chandrakanth Jayasinghe, CSBA Chairman Gihan Cooray, CDS Chairman Ray Abeywardena, CSE CEO Rajeeva Bandaranaike, Chairman Dimuthu Abeysekera, SEC Chairman Senior Prof. H. Dissabandara, CSE Clear Chairman Arjuna Herath, SEC Director General Chinthaka Mendis, Head of CSE Clear Dulani Warnakulasooriya, and CSE CEO-Designate Vindhya Jayasekera – Pic by Lasantha Kumara

•  CSE Clear Ltd., operates as licenced clearinghouse and CCP guarantees trade settlement, reducing counterparty risk and enhancing market stability
• CSE Clear Chairman Arjuna Herath says plans to introduce derivatives; licence application already submitted to SEC
• SEC Chairman Senior Prof. H. Dissabandara notes framework regulated by SEC and aligns with global standards like IOSCO principles
• CSE Chairman Dimuthu Abeysekera calls it a ‘defining moment’ in building globally integrated capital market

The Colombo Stock Exchange (CSE) on Friday officially launched a Central Counterparty (CCP) framework for equity transactions, significantly enhancing the safety, efficiency, and global appeal of the domestic financial system.

The launch was celebrated with a special market opening ceremony, marking the culmination of years of regulatory and infrastructure reform aimed at modernising the country’s post-trade environment and aligning with international standards.

The newly established CSE Clear Ltd., a wholly owned subsidiary of the CSE, will operate as the licenced clearinghouse and serve as the CCP for all equity trades. 

The CCP is regulated by the Securities and Exchange Commission of Sri Lanka (SEC) and introduces a neutral intermediary to every trade, guaranteeing the final settlement of securities and funds in cases of default. 

“From now on, the CCP will act as the counterparty to both buyers and sellers, ensuring the delivery of securities and funds regardless of individual defaults,” CSE Clear Ltd., Chairman Arjuna Herath said. 

He also noted that this builds on years of post-trade infrastructure reforms, including Delivery vs. Payment (DVP) in 2021, stock borrowing and lending, regulated short selling in 2024, and the shift to a T+2 settlement cycle. 

“With the CCP now in operation, the CSE is preparing to introduce derivatives to the market, with an application for a derivatives licence already submitted to the SEC,” Herath added.

SEC Chairman Senior Prof. H. Dissabandara lauded the launch as a result of sustained collaboration among the SEC, CSE, international partners like the World Bank, and brokering companies. 

“This framework has been designed to align with global standards, including the International Organisation of Securities Commissions’ (IOSCO) Principles for Financial Market Infrastructure. It brings immediate, tangible benefits, enhanced investor confidence, smoother operations for brokers, and increased appeal for foreign and institutional investors,” he said.

CSE Chairman Dimuthu Abeysekera described the launch as a ‘defining moment’ in Sri Lanka’s journey to build a globally integrated capital market. 

“As a stock exchange, we are already ahead in terms of technology. The CCP framework now elevates our post-trade systems to global benchmarks, reduces systemic risks, and lays the ground for trading new asset classes such as derivatives and futures,” he noted.

The CCP structure plays a critical role in reducing counterparty risk, one of the main vulnerabilities in financial markets, and provides a vital safeguard that can help withstand economic shocks, whilst enabling market innovation. 

The event drew participation from top officials of the SEC, Central Bank of Sri Lanka, brokerage firms, custodian banks, and senior representatives from the CSE, SEC, and the Central Depository System (CDS).