Feb 18, 2013 (LBT) - Once World's best performed Sri Lanka's only capital market, Colombo Stock Exchange's (CSE) trading floor has now become an empty space filled up with little number of stock brokers and less than 10 traders at a time when the market is also fluctuating day after another.
Some say market is undergoing a correction after excellent performance in 2010 and 2011 whilst two regulatory heads (Chairpersons) and an one Director General left their seats from 2011 to 2012 with serving less than one year in the midst of industry claiming various association and vested interest of former regulators including that regulator reactions killed mass force of the market – retail investor participation in Colombo.
However a new regulator has now taken the seat and market intermediaries and top investors are positive about a Green transformation to falling ‘Colombo Stocks’ while the naïve Sri Lankan retail investors are ‘Watching and Waiting’ to see a ‘Big Market Boom’ again.
What we saw was a 'Black Board with no Codes and Numbers' instead of the Board that used to show Prices and Stock Codes in Red, Green and Yellow.
According to the officials of CSE the exchange is undergoing a transformation and is on the process of implementing a new board and had already informed the media and the general public about the change at least month ago.
"By next week we will implement the new board" an official who did not wish to be identified told adding her apologies for the inconvenience caused for the investors at the only capital market in Sri Lanka.
However it is also learned that none of traders who may come to trading floor with their laptops, iPads or Tabs to trade online are not allowed and are requested leave their laptops, iPads, Tabs with the Security Guards counter at CSE although stock brokers can only take laptops, iPads, Tabs inside the trading floor. Some stock are investor said it is a 'Joke if investors are not allowed to bring in their Tablet PC or Laptop PCs to trading floor at an Era when the markets are becoming fully ICT oriented and when traders are feeling comfortable to trade on their own via personal trading account.'
Sri Lankan stock market industry had been promoting Online Stock Trading and Technology advancements in Stock Trading systems heavily during last few years and country boosts about its nation's IT Savyn Intelligence though many experts outline country's bureaucrats hardly take perfect steps to implement fully IT integrated systems. On the contrary some stock brokers' units still discourage the online trading to retail investors due to slow backup servers they maintain in their broking houses. Rather brokers sometimes quote that an Investor at least needs to have a Half a Million Rupees or above Rs.1 million in his account to get an online trading facility without divulging the stock broking houses failure to invest in IT related Infrastructure Cost to put an efficient server to run online trading software.
Sri Lankan online retail traders who are limited in numbers due to above facts has the benefit of trading via software such as initially with Colombo Direct Access Exchange (CDAX) and then with Iron One developed A-Trad, Direct FN – developed by Mubasher Technology a wholly owned subsidiary of National Technology Group (NTG), and Zinc.
On 24th February 2012 the Colombo Stock Exchange migrated its operating trading software to Automated Trading System (ATS) 7 developed by Tony Weerasinghe founded Millennium Information Technologies (MIT) which is now a unit of London Stock Exchange group. All the retail trading systems are now connecting to ATS 7 Which was to be incorporated earlier in January 2012 was postponed due to some resistance from the brokers who a complained that it wasn't user-friendly. But the CSE was adamant saying that it has to be done as the hardware in the former system was outdated.
However with the latest upgrade that came the Colombo Stock Exchange saw with transition to - ATS 7, since 24th February 2012 now with almost nearing to a year the market had seen considerably low turnover levels apart from few days which recorded large deals. According to analysts it is clearly evident that retailers had turned away from the market due to the problems in the lately upgraded system too.
There is still ‘Market Talk’ among many investors in Colombo as to whether the CSE suspended trading in five securities in August 2010 and introduced Price Bands (which was later removed) because the ATS 6 trading system could not cope with turnover per day of over Rs.5 billion.
It was in fact evident since the latter part of 2010, the market continued to have system problems — the system crashed one day. For the first time in Sri Lanka’s capital market history the CSE trading system crashed and the whole market activity was stopped on 19 September 2011.
Last year according to the stockbrokers, Millennium IT at a meeting with CSE and CEOs of stockbroker firms had accepted that there are faults in ATS 7 and that the system will be improved within the period from March to April. However there had been no news since then. While it was obvious that the ATS6 provided to the CSE has expired in 2011 and could not a handle large turnover, the question is as to why the CSE awarded the contract for a new system to the same vendor without calling for proposals from other software vendors.
Some global stock market analysts points out that even Millennium IT’s new system at the London Stock Exchange had faced issues as well although later it got only minor spotlight in the media.
“Concerns have been raised over two aspects of the system implementation in LSE:
i) The fall in market share in Turquoise since the migration and;
ii) The needlessly high levels of risk that Xavier Rolet is taking in the project to implement Millennium Exchange on the main market.
On 19th October 2009, The completed purchase of Millennium Information Technologies (MIT) of Sri Lanka by the London Stock Exchange for US $ 30 million (£18 m) was said to be a ‘controversial’ act taken by Rolet as one of the first moves after taking the helm of the London Stock Exchange according to reports from Europe.
That time Millennium IT claimed on its website that it has developed the “World’s Fastest” trading platform, running on Intel Xeon 5500 processors and it had said it will be possible to process one million orders per second “using volume produced Intel two socket Nehalem servers.
The trading platform in question was hitherto unproven in high volume markets, having been sold largely to smaller African and Asian exchanges. Thus it was with great interest that the system was made to go live on the Turquoise platform (now part of the London Stock Exchange) on 4 October 2010.
The migration from the Central Technology from the Cinnober system to the Millennium one seems to have been successful albeit for some hitches on the first few days of trading. However, the transition has seen Turquoise’s market share taking a significant hit to an average of about 5.2% from about 7% pre-MIT.
Many stock exchanges forget that brokers have to run businesses and that redeveloping their connected trading systems to a new platform involves spending money. Thus, when reaching a decision as to whether one should spend hundreds of thousands of pounds redeveloping their interface to Turquoise, which only had seven per cent of the market share behind BATS, Chi-X and the incumbent exchanges, some brokers may well have decided to pull the plug altogether. This may explain the loss of market share in the transition.
Formally established in 1985 with the commencement of a second trading floor by the Stock Brokers Association and amalgamation of the Colombo Brokers Association and the Stock Brokers Association trading floors as the the Colombo Securities Exchange (GTE) Limited, CSE first closed its trading floor for public in 1st April 2008 quoting security precautions when the country’s government lead forces were carrying out a humanitarian operation against LTTE Terrorists who were fighting to gain a land piece from the 65,000 square kilometer island nation.
Again on 20th July 2009, CSE reopened its Public Gallery and trading floor to public when the Sri Lankan nation defeated what could be termed as the ‘World’s biggest threat in 21st Century – Terrorism ‘ for the first time in the world; history killing one of the most dangerous terrorist leaders – Prabhakaran in May 19, 2009, at Mullaitivu, even prior to Osama Bin Laden being killed by United States Forces in May 2, 2011,at Abbottabad.
The Colombo Stock Exchange (CSE) is the main stock exchange in Sri Lanka and according its profile it is one of the most modern exchanges in South Asia, providing a fully automated trading platform. The vision of the CSE is to contribute to the wealth of the nation by creating value through securities. (By Jithendra Antonio)