Bse Rolling Settlement For Fi Deliveries

The Bombay Stock Exchange (BSE) is planning to introduce rolling settlement for deliveries made by institutions. Top exchange sources said yesterday that the bourse is planning to introduce T+5 trading and settlement cycle for the "institutional delivery" segment.

"In a T+5 settlement cycle, the entire settlement is completed on the fifth day after trading day. For example, if a transaction is conducted on Monday, then the settlement (both pay-in and pay-out) will be completed by Friday", the sources explained.

Currently, settlement on the BSE is conducted through batch processing which means that all transactions conducted during the week (Monday to Friday) are settled during the next week.

 

Thus, if a transaction is conducted on Monday (the first day of any settlement on the bourse), buyer members can take deliveries of the shares only on the Wednesday or Thursday of the next week.

For the rolling settlement, a separate segment for deliveries made by institutions will be introduced shortly along with a separate trading platform on the BOLT software.

"In the new segment, only institutions will be the sellers and the purchasers could be individuals as well as other institutions", the sources disclosed.

The institutions which will be allowed this facility will be domestic financial institutions, banks and also foreign institutional investors. "Corporates will not be treated as institutions", they added.

This will be a completely new feature in the exchange's repertoire.

The sources clarified that this is different from the rolling settlement which BSE plans to introduce in transactions of government securities.

They added that the shares under rolling settlement will be called "Sunrise securities" in stockmarket parlance. These will include the forward group shares and probably also some select stocks from the BSE's B group.

"Only deliveries made by institutions will be allowed to be transacted in this segment as these shares are mostly clean and do not result into bad deliveries", the sources said.

"A rolling settlement will ensure that both the buyer and seller will benefit from a shorter settlement cycle. While the buyer can have access to his shares on a shorter time span, the seller also will benefit as he will get access to his funds faster", the sources said.

Moreover, since institutional sales and deliveries are netted through their custodians and institutions are expected to be the major purchasers in this segment, this feature is expected to take-off within the next couple of months.

Under rolling settlement, a separate segment for deliveries made by FIs will be introduced shortly along with a separate trading platform on BOLT