The two largest bourses in the country, the National Stock
Exchange (NSE) and the Bombay Stock Exchange (BSE) have
already announced their plans to introduce rolling settlement.
This will usher a new era in the history of the Indian
stockmarket.
More From This Section
Tough the two exchanges have expressed their desire to
introduce the new trading mechanism, the manner in which the two
exchanges are going about it is quite different. While the NSE
plans to introduce rolling settlement only in the demat segment
from July 9 onwards, the BSE wants to start the same for the
institutional trades alone.
Globally, rolling settlement means the trade carried out on a
single day is netted at the end of the dav and the same trade is
settled either on the fifth or the third workingday,
Thus, a trade carried out on a Monday in the demat segment at
the NSE will be settled on the fifth working day which means,
that the investor who has sold shares wiU get the money on next
Monday and the one who has pur. chased the shares will get the
same on next monday.
However, the BSE has a different plan to unfold. As per BSE's
plans, it wW reduce the gap between the pay-in and pay-out
which wffl mean that for the trade which takes place on Monday
the investor will get the share or the money (as the case may
be) on next friday.
At present, the investor has to wait till the next Monday (15
days after the trading takes place) to get the money or shares,
At present the pay-in of a settlement takes place on the
following week'smursday and the pay- out takes place on next
Monday.
The exchange now wants to have the pay-in on ThMursday fol-
lowed by the pay-out on Friday, funds will not remain blocked
till Monday. The investor who trades on the first day of the
settlement will get the money on next week's Friday, which will
be pay-out day.
However, according to NSE plans, the roffing settlement for demat
segment would mean that all the trades taking place on a Monday
will be sewed on the fifth working day, making it T+5.
The G-30 nations have recommended a settlement cycle T+3,
however, the NSE officials say that they win shift to T+3, once
the T+5 settlement starts functioning smoothly.
There are sections of the market which argue that when the
settlement period is slashed to a single day, the speculators
will have a tough time to square-of their positions at the end of
the day.
Earlier, the speculators had five full days to decide on whether
to take delivery or to square-off the deals. Experts point this
as the only deterrent if rouing settle. ment is introduced.
However, they argue that lack of speculative opportunities will
compensate by the high liquidity which WiU come into the system.
The flow of funds will take place. swiftly and encourage
investors to go in for rouing settlement as their portfolio
will suddenly become more liquid.
In case of shortage of shares, the trades will be setfled on the
seventh day.
Thus, even in case of shortage of shares, the investors will get
their money on the seventh day after the trade is executed, The
NSE plans to have a T+2 autton cycle, which means the auction
will be conducted on Wednesday.
The NSE's move, to introduce rolling settlemet is also seen as
a measure to give a boost to the depository system.