A one-day trade settlement cycle (called T+1 in industry parlance) could remain a pipe dream for the domestic markets. The Securities and Exchange Board of India’s (Sebi’) proposal has met with stiff opposition from foreign portfolio investors (FPIs) — considered the price-setters for the Indian market.
Industry body Asia Securities Industry and Financial Markets Association (Asifma) has shot a letter to the markets regulator and the finance ministry highlighting operational difficulties for FPIs if the settlement cycle is halved.
At present, the domestic equity markets follow a T+2 settlement — the transfer of cash and securities between the buyer and seller gets completed two days after trading day.
In the letter, Asifma has highlighted operational challenges such as time zone difference, cumbersome information flow, and foreign exchange related issues, sources said. The Hong Kong-based body has also warned that shortening the cycle could discourage large investors from taking positions in the domestic market and could lead to increased instances of settlement failures.
An email sent to Asifma remained unanswered. Industry players said the key challenge for FPIs remains time zone difference as clients are spread across Europe, America, Hong Kong, and Singapore.
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