COLOMBO: Sri Lanka's Securities and Exchange Commission (SEC) on Friday said it had been given no proposal by brokerages to withdraw a plan to end margin trading by the year's end, which has frustrated brokers by dampening trading volumes and prices.
Market speculation that the SEC may ease up the restriction drove the Colombo Stock Exchange up by 6.8 percent in four sessions this week, from a 7-month-low that also saw it dip into negative growth on the year for the first time since 2008.
Seven stockbrokers from different trading houses told Reuters on condition of anonymity that 26 of Sri Lanka's 28 brokerages on Monday gave a proposal to the SEC requesting among other things, a reversal of the margin phase-out.
"We have not still got any request coming from anyone," SEC Director General Malik Cader told Reuters. "I have not got any proposals."
However, a senior official of the Colombo Stockbrokers Association on Friday confirmed the proposal had been submitted, and the official said the SEC had given signs it would review it with an open mind.
"We from the association have submitted the proposal, requesting mainly to ease the credit rules," the official told Reuters on condition of anonymity. "There is no confirmation that they will agree to all our proposals."
Sri Lanka's relatively small bourse was Asia's top performer in 2009 and 2010, gaining 341 percent since Jan. 1, 2009, when it was clear the government would win a 25-year civil war.
That said, it has struggled to garner significant foreign investment, because it has few stocks with a large enough free float to entice outsiders and there is long-standing concern its regulation particularly over insider trading is lax.
So the SEC has increasingly tightened oversight, and that has met with resistance and outright criticism from the clubby bourse's big players and brokers, who are used to a laissez-faire market.
All the brokers Reuters spoke to said with SEC's phased-out of margin dealing and increased supervision of trading has stifled growth. Many brokers blame the bourse's flat run this year to the new strictures, which the proposal seeks to ease.
"We have requested the regulator to allow credit at least up to a limit where brokers have cash," one broker said referring to a request in the proposal.
source - www.brecorder.com
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