SEM operates an automated trading system (ATS) developed by the Sri-Lankan based Millenium Information Technology and the staff of the SEM and the CDS. It is a mainstream computer system designed to match buy and sell orders placed by stockbroking companies. Each stockbroker has in his office a computer terminal connected with a server located at the SEM. The central system software consists of an electronic order book which enables members to post their buy and sell orders on behalf of their clients and to have their orders matched automatically. When an order is matched, the broker receives immediately a confirmation of the execution of the trade.

The SEM's Automated Trading System eliminates the inherent operational inefficiencies of the manual trading system by improving market transparency, providing a speedy and efficient matching of orders and enhancing the variety and quality of market data and information provided to the market.

When a client gives an instruction to his stockbroking firm to buy or sell a particular stock, the broker will enter the order on his terminal. The order will instantaneously be routed electronically to the Stock Exchange. The Automated Trading Systemautomatically matches the orders against each other, resulting in trades. The Automated Trading Systemrecords the sale price, quantity, buyer and seller and time of the trade. Trades that are executed by the Automated Trading System are known as on-market trades.

Orders entered into the Automated Trading System are matched under the supervision of the SEM. The order book maintained by the Automated Trading System for each security is divided into bids and offers and prices are determined and trades effected in accordance with specific rules depending on order parameters set out in the Trading Procedures.

SEM's Trading Schedule is as follows:

Under the Automated Trading System, the market goes through a number of different phases to allow for various activities, such as establishing opening prices and end of day processing. Trading is divided into four main sessions, each with its own operating hours as indicated in the table below.

Official Market

Development & Enterprise Market

During the pre- opening session, the system accepts orders. Orders can be amended and cancelled but no execution of trades takes place during this stage.

During the opening period, the opening price of each security is calculated by the system. The system also carries out the opening matching of trades and reports the trades accordingly.

During the continuous phase normal trading operations occur. A stockbroker can enter or modify clients' orders but this may entail clients losing their price time priority as a result of such amendments.

The closing session is a short session after the end of the continuous trading. During this session the system would essentially compute the closing prices for each security. The closing price of a security is its last execution price. No orders can be entered after the closing session. Entering of orders recommences at 9 00 am on the next trading day.

The opening price established for each stock is the price at which the greatest number of securities could be matched by the system. When there is more than one price at which the maximum number of securities can be traded, the highest price will be the opening price. Time priority does not exist at the opening session except for previous day orders. All orders that can be matched at the opening price are executed at the same price. All unmatched orders are automatically transferred to the continuous trading session and registered in the order book on a price and time priority

An order input into the ATS and displayed in the order book can, if required, be either cancelled or amended by a trader.

An order can be cancelled at any point in time prior to execution. If partially executed, any unexecuted portion of an order can be cancelled.

As regards amendment of orders, an order displayed in the order book can be amended prior to execution. The order can be amended in respect of price, volume and time attribute. However, some attributes such as Client ID, Security ID and order type (buy/sell) cannot be amended.

Orders may be entered direct into the Automated Trading System via the terminal of an authorized Automated Trading System Operator (a stockbroking company) or via the iNet functionality contained in the website of the SEM.

Any order input by an Automated Trading System Operator is duly validated and time-stamped. An order ID is allocated. The ID will be sued for all future references to the order.

Order entry instructions include security Code, Client Securities Account, Bell or Sell indicator, Volume or Quantity, Price, Type of Order and Order Attribures.

There are two main types of orders, namely limit orders and market orders which can be placed in the Automated Trading System.

A limit order is one which specifies the maximum buying or the minimum selling price. The volume of order must be indicated. The ATS will attempt to match the order until either the entire volume is matched or no further matching is possible within the limit price.

A market order is defined as an order to buy or to sell a security at the best price prevailing on the market at that point in time. No price is specified for this type of order, but volume must be indicated. The main advantage of a market order is the fact that market orders have first priority. (Price is given the highest priority in the system). The market order goes immediately to the top of the queue and executes the trade leaving all the limit orders behind. Thus, market orders stand a better chance of execution.

Limit orders can have three order attributes, namely "Qualifiers", "Time in Force" and "Disclosed/Hidden Quantity".

Order qualifiers modify the execution conditions of an order based on volume, time and price constraints.

Time in force limits the life time of an order in the order book. If an order does not indicate a time condition, it is only valid for the business day on which it was input. There are two types of time in force attributes, namely "Good Till Cancelled (GTC)" and "Day Order". GTC means that the order remains valid till cancelled within 30 days from the day on which it was input and is automatically cancelled by the system on the expiry date. On the other hand a day order is one which is valid until the close of the trading day and is automatically cancelled at the end of the trading day.

The disclosed quantity attribute reveals the order size and will cause execution to occur in blocks of disclosed quantity. The hidden quantity will not be visible to the market.

There are strict regulations governing order priorities. Orders are queued and traded according to price-time priorities. Better-priced orders trade first. If there is more than one order at the same price, the order that was placed first has priority. 

Whether an order trades or not depends upon a number of factors, namely:
- whether there are buyers or sellers willing to trade at the same price
- the quantity of securities being ordered
- the order type

A crossing is a trade between two stockbroking companies or a trade between the same stockbroking company for a specified quantity of securities at a specified price. For securities traded on the equity board and debt board crossing is carried out during the continuous session of the operating hours of the ATS.

Other factors could be dividends and other entitlements, takeovers and trading halts.

Securities trade upon the basis that they are entitled to upcoming dividends, rights issues, etc. If this basis changes, the security price generally also changes. Any such changes are displayed on the Automated Trading System.

Takeovers and schemes affect the price of a security and what types of orders can be placed.

The Stock Exchange operates three types of markets, viz: the Official Market, the Development Enterprise Market, the Debt Market.

The Official Market comprises of Equity Board, Odd Lot Board and Special Terms Board.

The Development Enterprise Market comprises of Equity Board, Odd Lot Board and Special Terms Board.

The Debt Market comprises of Debt Board and Crossings Board.

The Equity Board is meant for trading of listed ordinary shares and preference shares. Trading unit will be in multiples of 100 securities subject to a minimum of 100 securities.

The Odd Lot Board is designed for trading of listed ordinary shares and preference shares whose buy and sell orders have quantities less than 100 securities. Trading unit will be one security subject to a maximum of 99 securities. Odd lots trading cycle consist of continuous session only.

The Debt Board is for the trading of corporate debentures & bonds and government securities.

The Special Terms Board is designed for undertaking specific types of trades as and when the need arises based on market requirements. It in turn consists of the All or None Board, Crossing Board and Buy-In Board

“Odd Lot Board ” - the permissible trading quantity on the Odd Lot Board is less than 100 securities and is accepted in multiples of one security.

" Normal Board "- for the trading of listed ordinary shares and preference shares. Trading unit will be in multiples of 100 securities subject to a minimum of 100 securities. Securities denominated in local and foreign currencies will be traded on this board.

A crossing is a trade between two stockbroking companies or a trade between the same stockbroking company for a specified quantity of securities at a specified price involving only one buyer and one seller. For securities traded on the equity board and debt board crossing is carried out during the continuous session of the operating hours of the ATS.

The AON Board is a bid/offer of a specific quantity of securities which will be matched to a best contra order at the close of the 3rd market day from the day the initial bid/offer is input in the Automated Trading System in respect of securities traded on the equity board, debt board, DEM board. AON transactions will be invoked from a separate board.

Buy-In session is organised by the Stock Exchange upon receipt of request from CDS, in case of default by CDS participants to deliver securities traded on the equity board, debt board, DEM board on the settlement date. Buy-In is carried out on the buy-in board.

A trading halt is a surveillance mechanism in-built into the Automated Trading System during which period no exchange of transactions may take place. A trading halt may be imposed during one or more trading days. The Automated Trading System contains a system via which the Stock Exchange will inform the market of trading halts.

There are two types of trading halts, namely market halt and security halt.