Nse Depository Set To Kick Off With 8 Stocks

NSDL managing director C B Bhave told Business Standard that he has received confirmation from 8 companies which include State Bank of India, Reliance, ACC, Larsen & Toubro, IDBI, ICICI, Siemens and HDFC.

He said: Besides these eight companies, there will be 15 participants which will include custodians, banks and high net worth brokers with whom we will start our operations.

More companies have shown a keen interest in dematerialising their stock and have approached NSDL. However, we are looking at a target of 10 companies to start with, added Bhave.

Meanwhile, when NSDL commences operations, stock exchanges across the country will issue two sets of quotations for investors. This will be on account of an inevitable disparity in the prices of the stock of the same company due to simultaneous existence of a paper-based and a paperless system.

 

According to Bhave, the institution is talking to bourses for dual quotes once the depository is in place.

He said: The commencement of the operations will bring in difference in the price of a stock which is dematerialised and which exists in a paper-based form. The stock exchanges will produce two sets of quotations as there will be two systems for prices simultaneously existing. For example, stock exchanges will publish quotes of Reliance (depository) and Reliance (Paper) simultaneously.

The National Stock Exchange is planning to give two sets of books. Says NSE deputy managing director Ravi Narain: We will be providing one book for matching physical trades and another for matching depository trades. During the transition period, we will see lesser number of trades in the depository book and more in the physical one. However, eventually, volumes will shift to the depository book. The target will be to achieve a maximum volume in the depository.

For stocks where there is active institutional participation, the demand for dematerialised stock will be higher. Adds Bhave: The institutional investors do not have to worry about the history of the stock as they will get a clean lot in a particular stock. The transaction cost are also low for institutional players.

While the Indian law allows the investor to either hold shares in physical form or opt for dematerialisation, marketmen are sceptic about a smooth simultaneous existence of two parallel price mechanisms. When asked about the role of Sebi in monitoring the parallel system, Bhave said: There is no role for the regulator here as there is nothing fishy about the simultaneous existence of two prices for the same stock. We will ensure that things will be transparent.