Implement Suggestions In Toto To Ensure Better Returns: Gvr

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.

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.