The Telegraph
Since 1st March, 1999
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Sebi meet to vet T+2 readiness

Calcutta, March 22: The Secondary Market Advisory Committee of the Securities and Exchange Board of India (Sebi) will meet next week in Mumbai to review preparations for the introduction of a two-day — T+2 — settlement cycle from April 1.

Pashupati Advani, a leading Mumbai-based stockbroker and a member of the Sebi committee on secondary markets, said officials of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) would attend the meeting, besides the Sebi top brass.

“The RBI has promised, electronic fund transfer (EFT) facility will be available in 100 cities at a minimum by the end of this month. It said, at least one branch of a bank in each of these cities would provide the facility.

“However, we don’t know yet whether EFT will actually work. On paper, EFT has worked since 1996, but if it isn’t truly up and running by the end of this month, it will not be feasible to shorten the settlement cycle from April 1,” Advani said.

EFT would expedite movement of funds, without which a two-day settlement cycle — which actually offers a broker less than 48 hours to fulfil his settlement obligations — will fail.

Another concern is the need for rapid transfer of shares between depository participants, but according to Advani, it is a lesser problem. “In most cases, you can transfer shares digitally. So, it shouldn’t be that big a problem,” he said.

India will be the first country to implement T+2 settlement cycle. Even developed countries like the US have considered it, but chose not to introduce it in view of logistic problems.

Sebi chairman G. N. Bajpai had said, infrastructure permitting, India would go a step further and introduce T+1 in the foreseeable future. But experts feel, in the given infrastructure the problems outweigh the benefits.

Surge in volumes

The two-hour special trading session on Saturday witnessed brisk activity with volumes on the Bomaby Stock Echange (BSE) touching Rs 545.02 crore, which was quite impressive compared with a volume of Rs 1195.79 crore registered on a five-and-half hour session on Friday.

The trading session was necessary for National Stock Exchange (NSE) to test its back-up sites in Chennai.

The sensex continued to move northwards for the third consecutive day after US-led attacks started in Iraq. The sensex gained another 19 points on the back of a selective stocks rally. The BSE and NSE were open for trading between 11 am and 1 pm.

“The biggest dampener is uncertainty. When there is clarity, there is a clear direction,” Sanjay Sinha, a fund manager at UTI Mutual Fund, said. He felt the markets are buoyant as investors expect the war to end quickly. Sinha welcomed the two-hour trading session. “Such a session in these times gives some amount of confidence instead of a long weekend with no access to the markets. Long weekends bring in its wake a lot of nervousness, he said.

The BSE sensex opened moderately higher at 3208.58 and gradually moved up to a high of 3225.26 before closing at 3218.73 as against yesterday's close of 3200.15, a gain of 18.58 points or 0.58 per cent.

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