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    CSE Clear

    The CSE has incorporated CSE Clear (Pvt) Limited (CSE Clear), a fully owned subsidiary of the Colombo Stock Exchange, for the purpose of clearing and settling all transactions carried out on the CSE. It’s responsible for clearing all locally and foreign-denominated equity and debt securities. CSE Clear also functions as the Central Counterparty (CCP) for local equity transactions.

    CSE Clear guarantees the settlement of equity market transactions by becoming the buyer to all sellers and the seller to all buyers in secondary market transactions, thereby acting as a CCP. This process is identified as ‘novation’, which refers to the legal act of replacing the original contract between the buyer and the seller with two separate contracts — one between the buyer and the CCP, and the other between the seller and the CCP.

    Benefits of CCP

    Central counterparty clearing is the process by which transactions are cleared through a single (central) counterparty to reduce counterparty risk. In this setup, each party to a transaction enters into a contract with the CCP, rather than directly with the other party. This ensures that neither party bears the risk of the other defaulting. The CCP is, therefore, party to two opposing contracts — one with the buyer and one with the seller.

     

    The key benefits include:

    • International compliance and recognition
    • Reduced systemic risk
    • Strengthened overall market integrity
    • Enhanced position segregation and portability in the event of a default
    • Increased liquidity