Is the CB undermining the CSE?

The Central Bank has quashed reports that it has taken over the regulation of the CSE Clearing and Settlement system, stressing that it is simply overseeing the operation of the system, as it has been doing all this time.

Reliable sources however described the Central Bank announcement as another attempt to undermine confidence in the CSE and block any attempt by the latter to commence trading in government bonds.

CSE Chairman Akis Kleanthous has said that one of his main objectives to attract institutional investors to the CSE is to commence the active trading of government and corporate bonds, something that has irked the CB, which currently has a tight grip over bond trading.

“I don’t think the CB will give up bond trading that easily,” said a well informed source.

CSE sources pointed out that since Bank of Cyprus makes the daily clearance of the CSE transactions, then the overseeing of the clearance was and will always be with the CB, but nevertheless, they too were surprised at the tone and timing of the announcement.

Yiangos Demetriou of the Central Bank told the Financial Mirror that the Central Bank had always enjoyed the role of over-sight of the CSE Central Clearing system, which is now being extended in view of EU regulations.

“Nothing is going to change as regards the operation of the market, which is under the control of the CSE while the regulatory powers remain with the SEC,” clarified Demetriou.

Asked why the CB decided to ban Suphire from the Clearing system, and if this is not under the jurisdiction of the SEC, Demetriou said under the powers granted to the CB to oversee the Clearing system, it has the right to ban firms which may distort the smooth operation of the market.