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Wednesday, March 24, 2010

SRI LANKA - DERIVATIVES ENTER LOCAL CAPITAL MARKET

Sanjeevi JAYASURIYA

Derivatives, a long-term capital market instrument will be introduced to the Sri Lankan investment portfolio shortly.

This is the fist time that derivatives is introduced to the country’s capital market.

It could not be implemented until recently due to lack of legal and regulatory framework, Securities and Exchange Commission’s Financial Services Academy Director Dr. Harendra Dissa Bandara told Daily News Business.

The Securities and Exchange Commission Act No. 47 of 2009 enabled derivatives to enter the local capital market. Derivatives were captured under the definition of securities that can be traded in a stock exchange, he said.

Derivatives are gaining much popularity in the emerging markets due to its successful implementation and trading where Sri Lanka could benefit.

The capital market expansion could be fuelled by trading of derivatives by attracting potential investors.

The investors in the capital market face the risk and enjoy the returns.

The derivatives is an instrument where the investors could have another way of managing risk.

The investment portfolio will be diversified with the introduction of derivatives.

Market participants can have contracts and they could pursue underling assets in the future looking through derivatives.

It is important to educate potential investors regarding derivatives.

A two day regional conference on derivatives will be held in Colombo today.

The objective of this program is to create awareness before the product is introduced to the capital market.

A number of participants from countries such as India, Pakistan, Bangladesh, Philippines and Malaysia is attending this conference.

Over 100 local participants from the stock brokering industry, market intermediaries, unit trusts, academics, banking and financial professionals and lawyers will benefit from this conference.

Topics such as forwards and futures- products and pricing, trading strategies, clearing, settlement and risk management in derivatives will be discussed.

source - www.dialynews.lk