Sri Lanka to launch equity derivatives: report

Sri Lanka will introduce derivatives for its stock market in 18 months to help investors mitigate risks, the island nation's Securities and Exchange Commission (SEC) director general was quoted as saying. "The first derivative product is expected to be introduced in 18 months' time," SEC Director-General Channa de Silva said in comments reported in Monday's edition of the daily newspaper The Island. Silva could not be reached by Reuters for comment. Though the SEC and the Colombo Stock Exchange have talked about the introduction of derivatives for years, this is the latest signal from the regulatory body that the plan would move forward. The bourse has fallen over 5 percent so far this year and over 20 percent since it hit a life high of 3038.48 on Feb. 19, 2007. High interest rates and inflation, plus increased fighting in a 25-year civil war with Tamil Tiger separatists, has shaken investor confidence and kept the market volatile. "When you have a risk hedging mechanism, that will definitely improve the market confidence," Vajira Premawardhena, head of research at Lanka Orix Securities, told Reuters. "In a declining market, you will be able to protect your investment. It will allow more people to participate in the market and it will improve the liquidity in the market."