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How CSE is designed to fail retail investors

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Six Charges, 700% More Expensive:

Imagine walking into two shops selling the same product. In the first shop, you pay a simple 0.6% fee. In the second shop, you’re hit with a bewildering array of charges from multiple entities, and by the time you’re done, you’ve paid 2.27%. And that’s for a complete transaction: buying and selling.

The Shocking Numbers

Sri Lanka loves to say it wants to “develop the capital market.” But the way we charge investors tells the real story – a story of policy confusion, fee-layering, and a system designed to favor big players while suffocating small retail investors.

The evidence isn’t hidden. It’s printed clearly in every contract note that brokers issue.

Think about what this means in real terms. If you’re a teacher, government servant, or small business owner investing Rs. 100,000 in shares, you’ll pay approximately Rs. 2,270 just to complete a buy-sell cycle in Sri Lanka. In New Zealand, that same transaction costs just Rs. 300.

Sri Lanka is nearly four times more expensive than New Zealand – for the exact same act of investing.

Death by a Thousand Cuts

The problem isn’t just the total amount – it’s the sheer complexity. While New Zealand streamlines everything into one clean charge, Sri Lankan investors face a labyrinth:

*  Brokerage (negotiable, but only if you’re wealthy)

SEC Fee (Security Exchange Commission)

*  CSE Fee (Colombo Stock Exchange)

CDS Fee (Central Depository Systems fees)

*  STL (Share Transaction Levy)

Clearing Fee

*  Foreign Brokerage for foreign transactions

*  Various “special fees” are added periodically

Sri Lanka’s stock trading contract note reads like a mini-budget speech (Figure 1). Meanwhile, most modern markets charge one number. For an ordinary person trying to understand their contract note, it’s nearly impossible to figure out what they’re actually paying and why. Figures 2 and 3 show the stock trading “Sell” contract notes for a New Zealand Stock Exchange transaction and an Australian Stock Exchange transaction, (“Buy” contracts are similar) respectively.

The Rich Get Richer – By Design

Here’s where it gets truly disturbing. While small investors are locked into these punishing charges, the CSE allows brokers to negotiate lower fees for large transactions – typically those exceeding Rs. 100 million.

Let that sink in: If you’re a retail investor putting in your life savings of Rs. 500,000, you pay the full 2.27%. But if you’re moving Rs. 100 million, you get a discount.

This isn’t just unfair – it’s a systematic transfer of wealth from small investors to large players. The very people who need protection are subsidising the fees for those who need it least.

In modern markets like India, New Zealand, Canada, and Japan, all investors pay the same percentage. No negotiation. No special deals behind closed doors.

The Market Manipulation Connection

This two-tier system has darker implications. Large players, already enjoying preferential fee structures, have repeatedly been caught manipulating the market. The Securities and Exchange Commission has filed numerous cases against major investors for price manipulation, insider trading, and other violations.

These large players can:

*  Move in and out of stocks quickly due to lower transaction costs

*  Manipulate prices knowing small investors can’t react fast enough (their costs are too high)

*  Accumulate positions while retail investors are trapped by the fear of paying 2.27% round-trip costs

Sri Lanka’s fee structure encourages large speculative swings, discourages genuine retail participation, creates an uneven playing field, and opens doors for manipulation and cornering of illiquid stocks.

The Ethical Bankruptcy of Regulatory Charges

Let’s call this what it is: regulatory authorities charging fees that actively harm the market they’re supposed to develop are ethically bankrupt. In most countries, regulators protect investors. In Sri Lanka, they bill investors. Every trade finance the regulator (SEC), the exchange operator (CSE), the clearing house (CDS), the broker, and the government (through VAT).

This is ethically questionable because:

Regulators must be neutral – not profit from transactions

Charging retail investors to fund regulation creates a conflict of interest

It reduces trust, especially after repeated market manipulation cases

When regulators impose charges that make it unprofitable for ordinary people to invest, they’re not protecting investors – they’re protecting their own revenue streams at the expense of market development. When exchanges allow discriminatory fee structures, they’re not creating a level playing field – they’re creating a rigged game.

Why Sri Lanka’s Market Cannot Grow

Sri Lanka keeps asking: “Why is liquidity so low? Why don’t more people invest? Why doesn’t the stock market support economic growth?” Based on my research, using AI tools, here’s a comprehensive comparison table of stock market participation across the countries we mentioned:

Sri Lanka stands out negatively. The CSE has 284 listed companies representing 20 business sectors. Despite having a population similar to Australia (22 million vs 26 million), Sri Lanka has an estimated 50-100 times fewer stock market participants.

According to the Central Depository Systems (CDS) Annual Report 2024 for the Colombo Stock Exchange (CSE), the total number of local account holders (traders/CDS holders) was approximately 706,864 in 2024, up from 693,415 in 2023. The number of foreign account holders was 11,082 in 2024 compared to 10,937 in 2023. This places the total number of traders around 718,000+ in 2023-2024.

Critical Implications

Sri Lanka’s stock market participation rate, estimated at a low 3-4%, starkly trails regional peers such as India, where participation hits 6-8%, roughly two to three times higher. This gap highlights a critical structural problem in the Colombo Stock Exchange (CSE) ecosystem, where high fees averaging 2.27% combined with low participation create a vicious cycle that severely impedes market development. The core issues are both systemic and strategic.

The Marketing Failure: A Stock Exchange That Doesn’t Want Customers

Unlike its counterparts globally, the CSE remains more akin to an exclusive club rather than an accessible retail investment platform.

Where India’s National Stock Exchange (NSE) partnered with fintech innovators to create user-friendly investment apps while the CSE’s outreach is limited to sporadic seminars mostly attended by brokers and affluent investors. The CSE doesn’t want millions of small investors; it wants thousands of large ones who won’t complain about the fees.

There are no robust nationwide campaigns demystifying investing, no telecom partnerships to penetrate rural markets, and the mobile apps are not intuitive and fail to simplify account opening processes as expected. The CSE’s web and social media presence remain outdated, and when India onboarded over 40 million retail investors in three years via aggressive digital marketing, Sri Lanka struggled to add even 40,000 investors. This is not accidental, but symptomatic of an institution that profits more from high fees on lower volumes than from a broad base of smaller investors. The system favors wealth extraction from a few large players while discouraging retail participation.

Bureaucratic Ossification: When Vision Dies in Committee Rooms

The CSE suffers from a stifling bureaucratic culture, trapped in colonial-era mindsets with fragmented decision-making authority dispersed over multiple regulatory bodies like the SEC, Central Bank, and ministries. Sri Lanka’s capital market leadership remains focused on maintaining the status quo, prioritizing regulatory compliance over innovation. Without a strategic vision to increase retail participation, possibly aiming for even a modest 10% target, the exchange risks remain a peripheral entity rather than a genuine engine of national wealth.

The disconnect between high market returns (close to 50% in 2024) and low investor participation underscores the urgent need for the CSE to radically change course from a fee-heavy, opaque, bureaucratic institution to a transparent, technology-enabled, investor-friendly market. Unless Sri Lanka’s capital market astrology embraces inclusive, technology-driven, and simplified structures combined with aggressive marketing and retail investor protection, it will continue to underperform relative to regional peers, hampering broader economic growth and wealth creation.

Marketing Malaise: How the CSE Misses the Retail Wave

There are no nationwide campaigns to demystify investing. No partnerships with firms like financial institutions and tertiary education establishments, such as universities, where eligible customers are abundant and to reach rural areas. When India added over 40 million new retail investors in just three years through aggressive digital outreach, Sri Lanka couldn’t add 40,000. This isn’t accidental – it’s the natural result of an institution that makes more money from high fees on low volumes than it would from low fees on high volumes.

Bureaucratic Ossification: When Vision Dies in Committee Rooms

The CSE’s administration suffers from a fatal combination: colonial-era bureaucratic mentality married to a complete absence of strategic vision. While global exchanges have transformed into technology-driven, investor-first platforms, the CSE remains trapped in a time warp protecting its turf and revenue streams. Decision-making moves at the speed of a government file, while markets move at the speed of light.

The result is an exchange governed by administrators rather than visionaries. When Singapore launched a comprehensive digital trading ecosystem, when India implemented T+1 settlement cycles, when New Zealand simplified its entire fee structure to one transparent charge, Sri Lanka’s was busy protecting the status quo. There’s no long-term strategic plan to achieve even 10% retail participation. No vision for how Sri Lanka’s capital market fits into the economy of 2030. The CSE operates like a government department completing its KPIs rather than a dynamic institution building national wealth. The entire ecosystem – from the SEC to CDS to brokers – protects a broken system because they all profit from it.

Whenever the question of low retail participation comes up, officials trot out the same tired excuses: lack of investor awareness,’ ‘risk appetite,’ budgetary constraints for promotions.’ What they never admit is the elephant in the room, Sri Lanka’s fee structure. Charging 2.27% in a fragmented, opaque system while allowing negotiated rates for the wealthy isn’t market design, it’s a wealth extraction scheme dressed in regulatory language (Figure 3).

Add to that a lethargic marketing approach for attracting a wider population. Instead of proactive campaigns, digital engagement, and investor education, the system relies on outdated methods that fail to inspire confidence. The result? A market that moves backward while global peers surge ahead.

Our regulatory authorities have created a system that achieves the exact opposite of what a stock market should do. Instead of encouraging saving and investment, we punish it. Instead of attracting retail participation, we drive small investors away. Instead of ensuring fairness, we let the rich negotiate better terms.

The Bottom Line

The Colombo Stock Exchange and its regulatory framework aren’t just failing small investors – they’re actively working against them. No stock market can flourish when fees punish participation and policy rewards big players while suffocating small ones.

If Sri Lanka wants a real capital market – not just a slogan – it must not only stop taxing retail investors to fund inefficiencies and start building a market that ordinary citizens can finally trust, but also, they should actively promote the retail participation with more promotional activities to reach them by making collaborations with relevant firms such as financial institutions and tertiary educational establishments, especially universities.

Until someone in authority has the courage to blow up this exploitative system and start fresh, ordinary Sri Lankans will continue to be better off keeping their money under the mattress.

(The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT, Malabe. The views and opinions expressed in this article are personal.)



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Features

Peace march and promise of reconciliation

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Peace walk in progress

The ongoing peace march by a group of international Buddhist monks has captured the sentiment of Sri Lankans in a manner that few public events have done in recent times. It is led by the Vietnamese monk Venerable Thich Pannakara who is associated with a mindfulness movement that has roots in Vietnamese Buddhist practice and actively promoted among diaspora communities in the United States. The peace march by the monks, accompanied by their mascot, the dog Aloka, has generated affection and goodwill within the Buddhist and larger community. It follows earlier peace walks in the United States where monks carried a similar message of mindfulness and compassion across communities but without any government or even media patronage as in Sri Lanka.

This initiative has the potential to unfold into an effort to nurture a culture of peace in Sri Lanka. Such a culture is necessary if the country as the country prepares to move beyond its history of conflict towards a more longlasting reconciliation and a political solution to its ethnic and religious divisions. The government’s support for the peace march can be seen as part of a broader attempt to shape such a culture. The Clean Sri Lanka programme, promoted by the government as a civic responsibility campaign focused on environmental cleanliness, ethical conduct and social discipline, provides a useful framework within which such initiatives can be situated. Its emphasis on collective responsibility and shared public space makes it sit well with the values that peacebuilding requires.

government’s previous plan to promote a culture of peace was on the occasion of “Sri Lanka Day” celebrations which were scheduled to take place on December 12-14 last year but was disrupted by Cyclone Ditwah. The Sri Lanka Day celebrations were to include those talented individuals from each and every community at the district level who had excelled in some field or the other, such as science, business or arts and culture and selected by the District Secretariats in each of the 25 districts. They were to gather in Colombo to engage in cultural performances and community-focused exhibitions. The government’s intention was to build up a discourse around the ideas of unity in diversity as a precursor to addressing the more contentious topics of human rights violations during the war period, and issues of accountability and reparations for wrongs suffered during that dark period.

Positive Response

The invitation to the international monks appears to have emerged from within Buddhist religious networks in Sri Lanka that have long maintained links with the larger international Buddhist community. The strong support extended by leading temples and clergy within the country, including the Buddhists Mahanayakes indicates that this was not an isolated effort but one that resonated with the mainstream Buddhist establishment. Indeed, the involvement of senior Buddhist leaders has been particularly noteworthy. A Joint Declaration for Peace in the world, drawing on Sri Lanka’s own experience, and by the Mahanayakes of all Buddhist Chapters took place in the context of the ongoing peace march at the Gangaramaya Temple in Colombo, with participation from the diplomatic community. The declaration, calling for compassion, dialogue and sustainable peace, reflects an effort by religious leadership to assert a moral voice in favour of coexistence.

The popular response to the peace march has also been striking. Large numbers of people have been gathering along the route, offering flowers, water and support to the monks. Schoolchildren have been lining the roads, and communities from different religious backgrounds extend hospitality. On the way, the monks were hosted by both a Hindu temple and a mosque, where food and refreshments were provided. These acts, though simple, carry a message about the possibility of harmony among Sri Lanka’s diverse communities. It helps to counter the perception that the Buddhist community in Sri Lanka is inherently nationalist and resistant to minority concerns that was shaped during the decades of war and reinforced by political mobilisation that too often exploited ethnic identity.

By way of contrast, the peace march offers a different image. It shows a readiness among ordinary people to embrace values of compassion and coexistence that are deeply embedded in Buddhist teaching. The Metta Sutta, one of the most well-known discourses in Buddhism, calls for boundless goodwill towards all beings. It states that one should cultivate a mind that is “boundless towards all beings, free from hatred and ill will.” This emphasis on universal compassion provides a moral foundation for peace that extends beyond national or ethnic boundaries. The monks themselves emphasised this point repeatedly during the walk. Venerable Thich Pannakara reminded those who gathered that while acts of generosity are commendable, mindfulness in everyday life is even more important. He warned that as people become unmindful, they are more prone to react with anger and hatred, thereby contributing to conflict.

More Initiatives

The presence of political leaders at key moments of the march has emphasised the significance that the government attaches to the event. Prime Minister Harini Amarasuriya paid her respects to the peace march monks in Kandy, while President Anura Kumara Dissanayake is expected to do so at the conclusion of the march in Colombo. Such gestures signal an alignment between political authority and moral aspiration, even if the translation of that aspiration into policy remains a work in progress. At the same time, the peace march has not been without its shortcomings. The walk did not engage with the Northern and Eastern parts of the country, regions that were most affected by the war and where the need for reconciliation is most acute. A more inclusive geographic reach would have strengthened the symbolic impact of the initiative.

In addition, the positive impact of the peace march could have been increased if more effort had been taken to coordinate better with other civic and religious groups and include them in the event. Many civil society and religious harmony groups who would have liked to participate in the peace march found themselves unable to do so. There was no place in the programme for them to join. Even government institutions tasked with promoting social cohesion and reconciliation found themselves outside the loop. The Clean Sri Lanka Task Force that organised the peace march may have felt that involving other groups would have made it more complicated to organise the events which have proceeded without problems.

The hope is that the positive energy and goodwill generated by this peace march will not dissipate but will instead inspire further initiatives with the requisite coordination and leadership. The march has generated public discussion, drawn attention to the values of mindfulness and compassion, and created a space in which people can imagine a different future. It has been a special initiative among the many that are needed to build a culture of peace. A culture of peace cannot be imposed from above nor can it emerge overnight. It needs to be nurtured through multiple efforts across society, including education, religious engagement, civic initiatives and political reform. It is within such a culture that the more difficult questions of power sharing, justice and reconciliation can be addressed in a constructive manner.

by Jehan Perera

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Regional Universities

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Development initiatives: Faculty of Technology, University of Jaffna and NCDB

The countryside and peripheral regions have been neglected in the national imagination for many decades. This has also been the case with regional universities which were seen as mere appendages to the university system, and sometimes created to appease political constituencies in the regions. The exclusion of the rural world and the institutions in those regions was not accidental nor inevitable, but the consequence of conscious policies promoted under an extractive and exploitative global order. Neoliberalism globalisation, initiated in the late 1970s with far-reaching policies of free trade and free flow of capital, or the “open economy,” as we call it in Sri Lanka, is now dying. The United States and the Western countries that promoted neoliberalism, as a class project of finance capital to address the falling profits during the long economic downturn in the 1970s, are themselves reversing their policies and are at loggerheads with each other. However, those economic processes will continue to have national consequences into the future.

At the heart of such policies is the neoliberal city, which has become the centre of the economy with expanding financial businesses and a real estate boom. Such financialised cities also had their impact on universities, in lower income countries, where commercialised education with high fees, rising student debt, research for businesses and transnational educational linkages with branch campuses of Western universities, have become a reality.

In the case of Sri Lanka, while neoliberal policies began with the IMF and World Bank Structural Adjustment Programmes, in the late 1970s, the long civil war forestalled the accelerated growth of the neoliberal city. I have argued, over the last decade and a half, that it is with the end of the civil war, in 2009, coinciding with the global financial crisis, that a second wave of neoliberalism in Sri Lanka led to global finance capital being absorbed in infrastructure and real estate in Colombo. The transformation of Colombo into a neoliberal city was overseen by Gotabaya Rajapaksa as Defence Secretary with even the Urban Development Authority brought under the security establishment. While Colombo was drastically changing with a skyline of new buildings and shiny luxury vehicles drawing on massive external debt, there were also moves to promote private higher education institutions. The Board of Investment (BOI) registered many hundred so-called higher education institutions; these were not regulated and many mushroomed like supermarkets and disappeared in no time when they incurred losses.

In contrast to these so-called private higher education institutions that proliferated in and around Colombo, Sri Lanka, drawing on its free education system, has, over the last many decades, also created a number of state universities in peripheral regions. However, these regional universities lack adequate funding and a clear vision and purpose. The current conjuncture with the neoliberal global order unravelling, and the immediate global crisis in energy and transport are grim reminders of the importance of local economies and self-sufficiency. In this column I consider the role of our regional universities and their relationship to the communities within which they are embedded.

Regional context

The necessity and the advantage of robust public services is their reach into peripheral regions and marginalised communities. This is true of public transport, as it is with public hospitals. Private buses will always avoid isolated rural routes as their margins only increase on the busy routes between cities and towns. And private hospitals and clinics flock to the cities to extract from desperate patients, including by unscrupulous doctors who divert patients in public hospitals to be served in the private health facilities they moonlight. Similarly, it is affluent cities and towns that are the attraction for private educational institutions.

Public institutions, including universities, can only ensure their public role if they are adequately funded. Over the last decade and a half, with falling allocations for education, our state universities have been pushed into initiating fee levying courses, both at the post-graduate level and also for undergraduate international students. These programmes are seen as avenues to decrease the dependence of universities on budgetary support. However, the reality is that it is only universities in Colombo that can draw in students capable of paying such high fees. Furthermore, such fee levying courses end up pushing academics into overwork including by offering additional income.

Therefore, allocations for underfunded regional universities need to be steadily increased. Housing facilities and other services for academics working in rural districts would ensure their continued presence and greater engagement with the local communities. Increased time away from teaching and research funding earmarked for community engagement will provide clear direction for academics. Indeed, such funding with a clear vision and role for regional universities can provide considerable social returns. In a time when repeated crises are affecting our society, agricultural production to bolster our food system as well as rural income streams and employment are major issues. Here, regional universities have an important role today in developing social and economic alternatives.

Reimagining development

In recent months, there have been interesting initiatives in the Northern Province, where the Universities of Jaffna and Vavuniya have been engaging state institutions on issues of development. In an initiative to bring different actors together, high level meetings have been convened between the staff of the Agriculture Faculty and officials of the Provincial Agriculture Ministry to figure out solutions for long pending agricultural problems. Similar meetings have also been organised between provincial authorities and the Faculties of Technology and Engineering in Kilinochchi. These initiatives have led to academics engaging communities and co-operatives on their development needs, particularly in formulating new development initiatives and activating idle projects and assets in the region. Such engagement provides opportunities for academics to share their knowledge and skills while learn from communities about challenges that lead to new problems for research.

One of the most rewarding engagements I have been part of is an internship programme for the Technology Faculty of the University of Jaffna, where four batches of final year students, from food technology, green farming and automobile specialities, have been placed for six months within the co-operative movement through the Northern Co-operative Development Bank. This initiative has created a strong relationship between the Technology Faculty and the co-operative movement, with a number of former students now working fulltime in co-operative ventures. They are at the centre of developing solutions for rural co-operatives, including activating idle factories and ensuring quality and standards for their products.

I refer to these concrete initiatives because universities’ role in research and development in Sri Lanka, as in most other countries, are often narrowly conceived to be engagement with private businesses. However, for rural regions, the challenge, even with technological development, is the generation of appropriate technologies that can serve communities.

In Sri Lanka, we have for long emulated the major Western universities and in the process lost sight of the needs of our own youth and communities. Rethinking the development of our universities may have to begin with an understanding of the real challenges and context of our people. Our universities and their academics, if provided with a progressive vision and adequate resources and time to engage their communities, have the potential to address the many economic and social challenges that the next decade of global turmoil is bound to create.

Ahilan Kadirgamar is a political economist and Senior Lecturer, University of Jaffna.

(Kuppi is a politics and pedagogy happening on the margins of the lecture hall that parodies, subverts, and simultaneously reaffirms social hierarchies)

by Ahilan Kadirgamar

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‘Disco Lady’ hitmaker now doing it for Climate Change

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The name Alston Koch is generally associated with the hit song ‘Disco Lady.’ Yes, he has had several other top-notch songs to his credit but how many music lovers are aware that Alston is one of the few Asian-born entertainers using music for climate advocacy, since 2008.

He is back in the ‘climate change’ scene, with SUNx Malta, to celebrate Earth Day 2026, with the release of ‘A Symphony for Change’ – a vibrant Dodo4Kids video by Alston.

The inspiring musical video highlights ocean conservation and empowers children as future climate champions, honouring Maurice Strong’s legacy through education, creativity, and global collaboration for a sustainable planet.

The four-minute animated musical, composed and performed by platinum award-winning artiste Alston Koch, brings to life a resurrected Dodo, guiding children on a mission to clean up marine environments.

With a catchy melody and an uplifting message, the video blends entertainment with education—making climate awareness accessible and engaging for the next generation.

SUNx Malta is a Climate Friendly Travel system, focused on transforming the global tourism sector that is low-carbon, SDG-linked, and nature-positive.

Professor Geoffrey Lipman, President of SUNx Malta, described the project as a joyful collaboration with purpose:

“It’s always a pleasure to produce music with Alston for the good of our planet. And this time, to incorporate our Dodo4Kids in the video urging the next generation of young climate champions to help save our seas.”

For Alston, now based in Australia, the collaboration continues a long-standing journey of climate-focused creativity:

Says Alston: “I have been working on climate songs since the first release, in 2009, of the video ‘Act Now.’ Since then, I’ve performed at major global events—from Bali to Glasgow. I wrote this song because the climate horizon is darkening, and our kids and grandkids are our best hope for a brighter future.”

Alston’s very first climate song is ‘Can We Take This Climate Change,’ released in 2008.

It was written by Alston for the World Trade Organisation presentation, in London, and presented at ‘Live the Deal Climate Change’ conference in Copenhagen.

The Sri Lankan-born singer was goodwill ambassador for the campaign, and the then UK Minister Barbara Follett called it a “gift in song to the world suffering due to climate change.”

Alston said he wrote it after noticing butterflies, birds, and fruit trees disappearing from his childhood days.

In 2017, his creation ‘Make a Change’ was released in connection with World Tourism Day 2017.

Alston Koch’s work on climate advocacy is pretty inspiring, especially as climate change is now creating horrifying problems worldwide, and in Sri Lanka, too.

Alston also indicated to us that he has plans to visit Sri Lanka, sometime this year, and, maybe, even plan out a date for an Alston Koch special … a concert, no doubt.

Can’t wait for it!

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