The Delivery vs. Payment (DVP) system for stock market transactions, made to minimise the asset commitment risk of sellers, which was scheduled to go live on 26 July – subject to a final round of testing and industry-wide mock runs – has been postponed by the Colombo Stock Exchange (CSE).
In order to carry out further testing mock runs to ensure that all issues observed by the CSE during the past testing cycles are fully rectified, and considering the feedback received from the Stockbroker Firms, the CSE has decided to reschedule the go live date to 16 August 2021 in order to allow more time for market participants to test their systems and prepare for the system transition.
Accordingly, the final mock run will commence on 26 July 2021 and continue until 6 August 2021. Stockbroker firms and others involved in system testing are kindly requested to actively engage in the industry wide mock runs.
The objective of introducing a DVP system for the stock market in Sri Lanka is that under the DVP system, the physical custody of shares will be transferred to buyers only on settlement date.
Currently, physical custody of shares is transferred immediately upon the execution of the transaction while fund settlement takes place three market days after the transaction date (T+3), thus exposing the seller to a three-day settlement risk. Although stringent measures had been introduced to reduce settlement risk and the CSE has never experienced a settlement failure, the globally accepted mechanism for minimising settlement risk is through a DVP system, where the securities and funds are exchanged simultaneously on the settlement date.
The implementation of DVP, a much needed market infrastructure enhancement, will increase the overall credibility and integrity of the Sri Lankan stock market. Furthermore, the adaptation of the DVP settlement mechanism by CSE will be an additional qualification in obtaining the emerging market classification on international market indices.
Delivery vs. Payment system ‘Go Live’ delayed
23 Jul 2021
Delivery vs. Payment system ‘Go Live’ delayed
23 Jul 2021