Colombo Stock Exchange to be Demutualised. Transaction Costs to be Reduced from August

18th July 2010, www.nation.lk, By Asela Gunawardena

Stock Brokers hailed the move to demutualise the Colombo Stock Exchange (CSE) and termed it as a step in the right direction. The Cabinet has approved the proposal to demutualise the CSE, an initiative which is expected to make the CSE a more dynamic capital market.

Demutualisation will transform the CSE to a ‘for profit’, shareholder owned corporation providing financial benefits from share ownership in an exchange to stockbrokers from being a not-for-profit member controlled organisation.

Commenting on the demutualisation, CSE Chairman, Nihal Fonseka, in the CSE Annual Report 2009, highlighted the aspect of demutualisation saying, “To be fair by the members, there has been broad agreement among members that this should be the way (demutualisation) forward and the modalities of effecting the structural change are under consideration by the SEC,” Fonseka said.

Speaking to The Bottom Line, The CEO of J B Securities (Pvt) Ltd, Murtaza Jafferjee said that demutualisation of the CSE was about 11 years over due in his view and it would assist growth of the CSE.

When contacted by The Bottom Line, Director/CEO, Asha Phillip Securities Ltd, Dimuthu Abeysekara too welcomed the move to demutualise the CSE.

However, with regard to the reduction of transaction fees, he pointed out that brokers were finding it difficult to survive during the tough years of 2007 and 2008 and thus questioned the timing of the reduction in the backdrop of low activity levels witnessed from 2007 to 2008, “The reduction of transaction fees must accompany measures such as the listing of derivatives”, he pointed out.

Transaction costs of trading shares at the CSE will be reduced with effect from August 1.