What is CSE Clear?
CSE Clear (Pvt) Limited is a fully owned subsidiary of the Colombo Stock Exchange, responsible for the clearing and settlement of all transactions executed at the CSE. It acts as a Central Counterparty (CCP) for local equity transactions. The CSE Clear is a licensed clearing house under the Securities and Exchange Commission (SEC) act of Sri Lanka.
What are the benefits of establishing Central Counterparty Clearing?
The followings are main benefits of CCP.
- International Compliance and Recognition: Adheres to global standards and practices.
- Reduced Systemic Risk: Minimizes the potential for widespread financial disruptions.
- Strengthens Market Integrity: Enhances trust and stability in the market.
- Increased Liquidity: Improves the availability of funds and trading activities in the market.
What is Novation and how does the novation process work?
Novation involves replacing the original contracts between buyers and sellers with two contracts where one contract is between the buyer and CSE Clear and the other is between CSE Clear and the seller, thereby reducing counterparty risk as CSE clear being the counterpart for all trades.
What types of transactions does CSE Clear handle?
CSE Clear facilitates the clearing and settlement of:
- Local equity securities
- Foreign equity securities
- Local Debt securities
- Over the Counter Transactions
What are the settlement timelines for equity and debt transactions?
Eligibility includes:
- Equity Transactions: T+2 for normal and crossing board transactions
T+1 for Buy-In board transactions. - Debt Transactions: T+1 for TOM board
T+2 for SPOT board
What is Stock Borrowing and Lending (SBL) service?
SBL connects lenders and borrowers of shares for a predetermined period at a market-determined rate. This is a system where an investor borrows shares that they do not own from a lender who lends shares. Orders must be validated by CSE Clear before approval.
What are the membership categories under CSE Clear?
CSE Clear has three membership categories:
- Self-Clearing Members: Clear and settle their own transactions. Participants/Custodian Banks they admit.
- Professional Clearing Members: Settle their own transactions and those of other Trading Participants/Custodian Banks. (Limited Clearing Members
- Limited Clearing Members: Clear only non-CCP settled trades and must appoint a Professional Clearing Member to CM for CCP transactions.
How to become a Clearing Member?
To become a clearing member, the applicant must submit an application to the Clearing House in the prescribed format. This process generally involves meeting the eligibility criteria for appointment as a clearing member, including fulfilling entry requirements such as capital adequacy, sufficient resources, systems capability, operational capacity, and any other criteria set by the Clearing House for membership admission.
How does CSE Clear manage risk?
CSE Clear employs a margin methodology that includes Base Margin Requirements and Daily Margin Requirements, ensuring that Clearing Members maintain sufficient collateral to cover potential risks
How often are margin requirements reviewed?
Daily margin requirements are communicated to Clearing Members at the end of each applicable trade day and are based on the clearing member’s trading activities of each trading day.
Base margin requirement is reviewed and communicated quarterly based on the Clearing Member’s daily average purchase turnover of the previous quarter.
Do Limited Clearing Members have any contributions or margin requirements?
No, Limited Clearing Members are not required to make contributions to the Contributory Guarantee Fund (CGF) or furnish margin requirements.
What is the Contributory Guarantee Fund (CGF)?
The CGF is a financial safeguard for addressing shortfalls in the event of a Clearing Member’s default. It consists of contributions from CSE Clear and Clearing Members.
This fund contains of all accumulations and gains related to the Contributory Guarantee Fund, including accrued interest and other income generated from the contributions.
How can I get more information about becoming a CSE Clear?
For detailed information on CSE Clear or other inquiries, please contact our support team (Mobile : +94 11 2 356 533, Email: info@cseclear.lk) or refer to the membership guidelines available on our website