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Colombo Stock Exchange to Reduce Settlement Cycle for Equity Transactions

The Colombo Stock Exchange (CSE), in consultation with the Securities and Exchange Commission of Sri Lanka (SEC) and industry participants, has announced that the settlement cycle for equity transactions will be shortened from T+3 to T+2, effective June 10, 2024. This change will apply to all trades conducted on or after this date.

Settlement cycles are crucial for ensuring smooth and efficient trading processes in the stock market, as they determine when securities and funds are exchanged between buyers and sellers following a trade.

Currently, under the T+3 cycle, funds and securities are settled on the third market day after the trade date. Transitioning to a T+2 cycle means that settlements will occur on the second market day after the trade date, speeding up the exchange process.

This reduction in the settlement cycle will enhance market efficiency by reducing operational risks, liquidity requirements, and the need for margins and collateral. Faster settlements will also benefit investors by providing quicker access to funds, enabling more efficient reinvestment, and ultimately boosting market liquidity. Additionally, this initiative aligns the CSE with international standards and best practices.

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