CSE to introduce regulated short selling through stock borrowing and lending to enhance trading opportunities

The Colombo Stock Exchange (CSE) is pleased to announce the introduction of two significant initiatives shortly, Regulated Short Selling (RSS) through Stock Borrowing and Lending (SBL), which are aimed at enhancing trading opportunities and flexibility for investors.

In this regard, the CSE conducted an awareness session on RSS and SBL, to the institutional and high net worth individual investors and CEOs of trading participants on 8th September 2023 at Shangri-La Colombo with the participation of CSE Chairman Mr. Dilshan Wirasekara, Chief Executive Officer (CEO) Mr. Rajeeva Bandaranaike, CSE Chief Regulatory Officer (CRO) Mr. Renuke Wijayawardhane, Securities and Exchange Commission of Sri Lanka (SEC) Deputy Director General Mr. Tushara Jayaratne and the senior management and the staff of the CSE.

Stock Borrowing and Lending (SBL)

SBL, a groundbreaking initiative by the CSE, connects lenders and borrowers of shares for a predetermined period, allowing them to capitalize on market trends as in prevailing interest rates.

Only eligible securities specified by the CSE will be allowed for SBL transactions, and the eligibility of these securities will be reviewed by the CSE on a quarterly basis.

All investors who maintain Central Depository System (CDS) accounts will now have the privilege of engaging in SBL transactions as lenders and borrowers via the CDS through their respective trading participants and custodian banks (CDS participants).

CDS participants are empowered to act as intermediaries for SBL transactions. Investors can seamlessly carry out SBL transactions by submitting the lending/borrowing orders using the participant pool account or by submitting orders directly to the CDS through their participants.

Advantages of SBL mechanism

For lenders, SBL offers a unique opportunity to leverage a portion of their portfolio that may not be actively used for regular trading, while simultaneously earning an additional fee-based income. On the other hand, borrowers can leverage the potential of price movements in a declining market, amplifying their gains.

Investors can take advantage of this opportunity by establishing a SBL agreement with the relevant lending or borrowing participant.