Share trading in Sri Lanka commenced in the 19th century, when British Planters needed funds to set up Tea Plantations in Sri Lanka. The Colombo Share Brokers Association commenced trading of shares in limited liability companies in 1896, involved in setting up plantations in the country.

 

The Colombo Share Market continued operations for almost a century, experiencing several vicissitudes due to political and economic factors during the period. A landmark event in the history of share trading in Sri Lanka was the formalization of the market with the establishment of the "Colombo Securities Exchange (GTE) Limited" in 1985, which took over the operations of stock market from the Colombo Share Brokers' Association. It was renamed ´Colombo Stock Exchange´ (CSE) in 1990.

 

The CSE is a company limited by guarantee, established under the Companies Act No. 17 of 1982 and is licensed by the Securities & Exchange Commission of Sri Lanka (SEC). The CSE is a mutual exchange and has 15 full members and 13 Trading Members licensed to trade both equity and debt securities, while one member is licensed to trade in debt securities only. All members are licensed by the SEC to operate as stockbrokers. All members are corporate entities and some are subsidiaries of large financial institutions.

 

The policy making body of the CSE is the Board of Directors composed of nine members. Five directors are elected by the 15 member firms while the Minister of Finance nominates four.

 

The CSE Board has four sub committees appointed to administer the operations of the CSE. The Exchange Secretariat, headed by the Chief Executive Officer, is responsible for the operations of the Exchange, and is accountable to the Board of Directors.

 

The Securities and Exchange Commission of Sri Lanka (SEC) was established under the Securities Council Act No.36 of 1987(now amended as the Securities Council Act), to regulate the securities market in Sri Lanka, grant licenses to stock exchanges, stockbrokers, stock dealers and unit trusts who engage in the business of trading in securities. The CSE operates as a Self Regulatory Organization (SRO) subject to the regulation and supervision of the SEC. Sri Lanka was one of the first countries in South Asia to establish a capital markets regulator.

 

The CSE was one of the first Exchanges in the region to successfully automate its clearing and settlement functions in 1991, with the installation of a Central Depository and an electronic clearing and settlement system for share transactions, and an Automated Trading System (ATS) in 1997. This has been able to notably enhance the transparency and efficiency of the securities market in Sri Lanka.

 

In recognition of the technology, systems and regulation, the CSE was admitted to the World Federation of Exchanges (WFE) in 1998, becoming the first South Asian member. It was also a founding member of the South Asian Federation of Exchanges (SAFE) in 2000.

 

At present the CSE offers advanced facilities for the secondary trading of equity and debt instruments. The Debt Securities Trading System (DEX) implemented in 2003 enables the secondary trading of the Beneficial Interest in Government Securities. DEX provides investors an opportunity to diversify their portfolio and thereby reduce risk.

 

The Exchange calculates two main Price Indices, namely, the All Share Price Index (ASPI) and the Milanka Price Index (MPI). Price indices are calculated for each of the 20 Business sectors. Total Return Indices (TRI) are also calculated to track the market performance on a Total Returns basis. The TRI exceeds the scope of existing price indices (ASPI, MPI) and incorporates returns from dividends into its computation. CSE publishes TRI based on the ASPI, MPI, and the 20 Sector Price Indices.

 

279 companies are currently listed on the CSE, representing twenty (20) business sectors with a market capitalization of Rs.2,023.8 billion (approx. US $ 15.3 billion) as at 25th April 2012.

 

The CSE provides companies the opportunity to raise equity and debt capital required for their expansion through the primary and secondary markets while providing a mechanism for price discovery in an active secondary market. The equity and debt securities of a public company can be listed on either the Main or Diri Savi Board of the CSE; a Main Board for larger companies and a Diri Savi Board for medium to small companies and for start up companies.

 

Foreign institutions and individuals, including non-resident Sri Lankans are permitted to buy and/or sell shares in a listed company up to 100% of the issued capital except in the case of a few companies, where certain restrictions have been imposed. Investment in shares in Sri Lanka and repatriation of proceeds should take place through a Securities Investment Account(SIA) opened with a licensed commercial bank. Income from investments such as interest, dividends and profit realized from such investments are not subject to Exchange Control Regulations.

 

Live market information is presently being disseminated through member firms, information vendors, CSE branches, print & electronic media and through a special local TV telecast. International financial press such as Reuters and Bloomberg also provide daily online trading information to investors worldwide.

 

The new CSE website, www.cse.lk, launched in October 2007, provides access to a comprehensive array of real time market information, order book information and includes charts and graphs of Market and Company performance to help existing and potential investors make informed investment decisions. The new website is designed to function as the primary communication channel of the CSE and most information on the website is downloadable in Excel, CSV and XTML formats. The CSE website also facilitates fast access to individual listed company profiles, as well as links to Online Trading platforms offered by stock broker firms. A dedicated website for the CDS was launched in 2009. www.cds.lk.

 

The CSE is committed to setting up branch offices with the objective of broad basing the stock market and providing wider access. The CSE presently operates five branches in the Southern (Matara), Central (Kandy), North Western (Kurunegala), Western (Negombo) and the Northern province (Jaffna). The Branch office in Jaffna was opened in April 2010.

 

The CSE has initiated activities to improve the market infrastructure and the regulatory framework to integrate and strengthen the securities market in Sri Lanka.