The Chairman of the Colombo Stock Exchange (CSE) and Central Depositories Systems (Pvt) Ltd, Vajira Kulatilaka last week said the CSE has commenced a re-branding exercise with the implementation of the new state-of-the-art new generation Millennium Central Securities Depository (CSD) in November 2014.

“It is indeed an ambitious plan over the next three years to transform the CDS to be a developed depository on par with other depositories in the Asian region. I am happy to announce that we have already commenced our rebranding exercise with the implementation of the new state-of-the-art new generation CSD in November 2014 replacing the 19-year-old legacy system that we used since 1991,” Kulatilake said addressing the 17th Annual Cross Training Seminar of the Asia-Pacific Central Securities Depository Group (ACG), held in Colombo last week.

He said that the Central Depository in Sri Lanka is one of the first to be established in Asia, way back in 1991 where he was personally involved in the setting up of the CSD being part of the USAID advisory team that set up the CSD under a USAID project.
“It saddens me to note, however that despite being a forerunner in this area in the 1990’s we have lagged behind in the past two decades mainly due to the unsettled conditions internally – but now those problems are over,” he said.

He, however, noted that the strong ties Sri Lanka builds through the Asia-Pacific Central Securities Depository Group (ACG) as well as the good relations the island maintains with depositories in the region will help it to catapult into the next era of growth.

Meanwhile, emphasizing on the importance of Depositories for the functioning of Capital Markets, the CSE Chairman said, “In the global capital market arena, on which we function, the efficient and robust functioning of central securities depositories is fundamental to the efficient functioning of securities markets. In fact, it is the backbone of the securities market.”

“As a key pillar of the Capital market services infrastructure, central depositories are providing more than a supportive role to the global financial market; depositories now use innovative forms of technology to increase efficiency minimize risk and reduce costs in order to support investors and market intermediaries and is responsible for ensuring the safety  of customer assets,”
Kulatilaka added.

The ACG Cross Training Seminar was hosted by the CDS on the 12th and 13th of May in Colombo. This is the first time the CDS is hosting the Cross Training Seminar and the event saw the participation of 95 representatives from depositories across the region, the highest number of participants seen at an ACG event.

Meanwhile, Director General of the Securities and Exchange Commission (SEC) Vajira Wijegunawardene who also spoke at the event said that in the Sri Lankan context there exists a settlement risk in the absence of DVP and an asset commitment risk as securities move on T day and settlement of funds is made on T+3.

“We have been extremely fortunate to have not experienced any settlement failures. In the Government Securities sphere too, the settlement risk exists and certain counterparties do not trade with one another,” he pointed out.

Therefore, Wijegunawardena said that the Securities and Exchange Commission, Central Bank of Sri Lanka and the Colombo Stock Exchange made a decision to fast track the implementation of a fully integrated CCP mechanism for the financial market as a joint initiative to be in line with BIS and IOSCO standards.