1. What is the ATS?

The ATS is an automatic trading system 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.

2. What are the main benefits of the ATS?

The ATS 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.

3. How shares & other securities would be traded on the ATS?

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 ATS automatically matches the orders against each other, resulting in trades. The ATS records the sale price, quantity, buyer and seller and time of the trade. Trades that are executed by the ATS are known as on-market trades.

Orders entered into the ATS are matched under the supervision of the SEM. The order book maintained by the ATS 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.

What is the trading schedule of the different markets operated by SEM?

The Trading Schedule of the Exchange is as follows:

4. What are the different market phases under the ATS and how do they affect trading?

Under the ATS, 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

5. What happens during each market phase?

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.

6. How is the opening price determined?

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.

7. Can an order input into the system be amended or cancelled?

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.

8. How can orders be transmitted to the ATS?

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

9. What happens to an order once it is entered into the ATS?

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

10. What instructions should be entered for each order?

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

11. What are the types of orders can be placed in the ATS?

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

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.

12. What are the attributes of Limit Orders?

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.

13. How are orders queued for trading?

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, except in the case of crossings.

14. How orders are traded?

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

15. What are crossings?

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.

16. What are the other factors affecting orders?

This section outlines how prices and trading are affected by dividends and other entitlements, takeovers and trading halts.

17. What is the basis of quotation?

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 ATS.

18. Does takeovers and merger schemes affect the price of a security?

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

19. How many Board does the Official Market comprise under the ATS?

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

20. What is the difference between the Odd Lot and the Normal Lot

The normal lot trading board (screen) allows trading of shares in multiples of 100. This would be the screen where almost all of the retail activity would take place. The odd lot board (screen) is the board through which quantities less than 100 shares are traded. These shares generally trade at a slight discount to the normal lots mainly due to the fact that there is a lesser demand for odd quantities in the market.

For instance, if a person intends to sell 733 shares of NMH shares, his broker would trade 700 shares on the normal lot board and trade the balance of 73 shares on the odd lots board.

21. What is the difference between the "Crossing Board", the "All or None Board" and the "Buy-In 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 ATS 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.

22 What is the a trading halt?

A trading halt is a surveillance mechanism in-built into the ATS during which period no exchange of transactions may take place. A trading halt may be imposed during one or more trading days. The ATS 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.