BSE launches electronic contract notes

The BSE yesterday launched electronic contract notes for retail and institutional segments.

This will cut down the bulk of the paper work at brokers' back offices and will enable brokers to issue contract notes to investors all over the country and even to overseas investors immediately upon completion of trades.

Transactions punched in by an investor will go through the broker to the exchange and the return confirmation contract note will come to the investor and the custodian without any manual intervention at any point.

Also, BSE members can issue these electronic contracts notes-cum-bills to their sub-brokers through the same system.

In a media release, the BSE said: "The electronic contract note cum bill system is meant for members of both BSE and NSE, and covers both retail and institutional segments."

This move is expected to reduce the bulky and cumbersome paperwork of big broking houses, which have to issue separate contract notes and separate bills to investors for each trade.

Introduction of electronic contract notes follows the Securities and Exchange Board of India's (Sebi) recent circular to streamline the issue of electronic contract notes as a legal document like the physical contract notes (PCNs).

It had advised all stock exchanges to prescribe a standard format for electronic contract notes in their bye-laws, rules and regulations.

Incidentally, electronic contract notes have become safer after the implementation of the straight through processing (STP) system, which automates the entire process of trading right from trade initiation to settlement. These will pave the way for a T+1 settlement cycle in the later stages.

STP implies electronic capturing and processing of transactions in one pass from the point of first deal to the final settlement.

It allows any information generated at one end to reach its destination uninterrupted without any manual interference in between. This seamless flow of information in electronic form and the use of digital certificates (electronic contract notes) minimise the use of manual intervention to a large extent.

Securities are settled online by way of direct debit to the depository account. Thus, STP will facilitate the smooth completion of transactions, avoid punching errors and consequent problems arising from re-entry of data.