CSE launches investigation into technical difficulties faced by broker systems vendors transitioning to DVP

The Colombo Stock Exchange (CSE) has launched an investigation into the technical difficulties experienced by broker systems vendors in the first two days of implementing the delivery vs. payment (DVP) mechanism. 

The CSE implemented the DVP settlement mechanism as scheduled on Monday this week. However, the CSE noted that one external broker system vendor had technical difficulties connecting to the CSE’s trading system, resulting in a delay of pre-open session on Monday.

Meanwhile, CSE has observed certain inconsistencies in the client securities balances of a particular broker system vendor yesterday.

In order to provide additional time for stockbroker firms to verify their client securities balances, the open auction call session was extended up to 11.45 a.m. and consequently trading commenced at 11.45 a.m. yesterday.
“The Board of Directors of the CSE has already begun a thorough investigation into the technical difficulties experienced by the broker systems vendors and will take firm action to ensure there is no repetition of such incidents,” the CSE said in a media release yesterday. 

It noted that the DVP mechanism was implemented following extensive testing and industry-wide mock runs been carried out over a period of 7 months, involving broker systems.

The most recent mock run of the DVP trading environment was performed from 5th July to 11th   August with the involvement of the CSE, broker systems vendors and stock brokerage firms.

Moreover, the CSE ruled out that the current situation in the country in which many market participants are operating remotely, having any bearing on the issues experienced by broker system vendors.“The delay in the market opening on both days was to ensure that the two broker level systems that had issues were duly rectified and this was the responsible course of action to ensure the functioning of a fair and orderly market. The decision was taken to ensure that all market participants and investors were given an opportunity to fully participate in the trading session, given the importance of the transition to the DVP environment,” CSE said.

However, the CSE stressed that overall operating infrastructure and all market participants’ trading systems have worked seamlessly during active market operations in the first two days of the DVP environment.

The CSE highlighted that the implementation of a DVP settlement mechanism was a result of a three-year long project and executed following a substantial amount of planning, hard work and resource allocation as a collaboration effort of all stakeholders including the CSE, SEC the stock broking community, broker system vendors and other market intermediaries.

The transition to DVP mechanism is also a key part of CSE’s roadmap to modernise and mitigate settlement risk while enabling new products on the exchange.