Nsdl To Begin Operations By Month-End

National Securities Depository Ltd (NSDL), the countrys first ever depository, will commence operations by October end to begin a new era in the countrys capital market history.

NSDL managing director C B Bhave told a gathering at the Indian Merchants Chamber yesterday that trading screens would be provided by the National Stock Exchange by November.

A separate trading segment will be created for trading in the dematerialised shares by the NSE, and a separate set of quotations for such stocks will also be provided. The dematerialised stock will be certainly traded at a premium similar to that obtained by issuers on the GDR, Bhave said.

 

While explaining the benefits involved in using the depository, Bhave said: The transactions costs will be much lower compared to risk that an investor exposes himself to.

For instance, when he invests for the first time, he pays for shares that he buys on the pay-in day and has to wait for a long time before these shares to be transferred in his name.

He has to send those shares to the company registrars by post. This includes a major risk as postal delays and losses have resulted in many investors suffering as a result.

Bhave observed that the process became even more cumbersome in bulk deals when a huge lot of shares are to be counted and sorted at every entry and exit point. For example, in a deal involving 1 lakh shares, the mere counting of share certificates is repeated several times.

The holding custodian counts those shares before giving them to the buying broker, who will count and deliver them to his foreign institutional investor client.

The foreign players will again count and submit them to their custodian, who will again go through the same process. All this can be eliminated in a dematerialised environment.

The NSDL chief also emphatically stated that stock exchanges need to encourage depository trades so that the risk to which the clearing houses or corporations are exposed is minimised. The pay-in and pay-out can be carried out on the same day thus minimising the risk taken by the bourse in terms of exposure.

Eventually, Indian markets will switch to a rolling settlement system. According to Bhave, the stock lending process can be introduced in India as soon as the tax authorities rationalise their

definitions on borrowing and lending.

Mutual funds can start lending stocks as they are neutral players in the market.