RBI to review mkt trading, settlement timings to enhance scope, liquidity

The RBI announced the formation of the working group, to be headed by R S Ratho

Reserve Bank of India’s move to take a comprehensive review of trading and settlement timings of various markets under its regulation is expected to help in expanding ambit and enhance liquidity in market instruments.

 

The regulator has set up a nine-member working group to make recommendations on trading and settlement timings which would submit its report by April 30.

 

CS Setty, Chairman, State Bank of India (SBI) said the regulatory announcement on forward contract, reviewing trade settling cycle will ensure better price discovery, more broad basing of participants.

 

Seconding Setty’s view, Zarin Daruwala, CEO, India and South Asia, Standard Chartered Bank, said the announcements around introduction of forward contracts in government securities, increased access to the government securities trading platform and the review of trading and settlement timings, should enhance liquidity in market instruments.

 

Reserve Bank of India (RBI) in a statement said the synchronised and complimentary market and settlement timings across various financial market segments can facilitate benefits of efficient price discovery and optimisation of the liquidity requirements.

 

RBI made an announcement about the working group to be headed by R S Ratio, its Executive Director, in a statement on Developmental and Regulatory Policies released along with the Monetary Policy Review (MPC).

 

Over the last few years, there have been several developments including increased electronification of trading, availability of forex and certain interest rate derivative markets on a 24X5 basis. Also, there is increased participation of non-residents in domestic financial markets and payment systems are available on a 24X7 basis, RBI said.

 

The working groups terms of reference include review of the current trading and settlement timings for RBI regulated financial markets including functioning hours of market infrastructures for trading, clearing, settlement and reporting of transactions. The panel would identify the frictions, challenges and issues in overall functioning of markets due to current trading and settlement timings in terms of transmission of prices/rates, volatility and distribution of trades, liquidity requirements, netting efficiency.

 

The working group would also examine cross-country practices relating to market timings and their influence on market development in terms of participation, liquidity, volumes, and also examine the implications, including benefits, costs and challenges in revising the current timings for trading and settlement.