The Hindu Business Line : SEBI scores yet another point with T+2

THE Centre may not have been able to coax State Governments to keep their date with VAT, but the Securities and Exchanges Board of Indian (SEBI) has certainly managed to push the Indian bourses into the T+2 rolling settlement system at the start of the new financial year.

This is definitely a singular feather in the regulator'scap! Today, as the Indian capital market gets into doing final closure of trade transactions within a span of three days (the day of the transaction committed or T and two days from then or + 2 when the pay-in, pay-out on the transaction takes place), it is SEBI's ardent pursuit of liquidity and transparency that has paid off.

Steering the capital market out of the old outcry system into screen-based trading, dismantling the badla system and instituting futures trading in equity, moving from weekly settlement to the rolling system, has not been easy for the regulator. But it was undeterred in its path, even if it meant dragging a whole community of market intermediaries kicking and screaming through the culture shock of the quick changeovers.

However, the standalone brokerages are queasy about losing more and more ground to the integrated players, particularly banks. Electronic money transfer will work smoothest for the player who is both the depository participant (DP) and the bank holding the investors' money.

The RBI took its time but finally delivered special electronics fund transfer (SEFT) that will ensure easy electronic money transfer over a wide bank network.

The brokers, from past experience, are sure it will be a while before the system settles in. Until that happens, they see themselves tearing around picking and delivering cheques to meet shorter deadlines. Offline, some of the investors and the brokers are edgy about the increasing transparency this transition is bringing into market operations. Moving towards seamless trading will entail tracking the clients' depository and banking accounts, online confirmation of trades by custodians, none of which is palatable to the tax evader.

Not so long ago, a transaction done on a Monday could take until the Thursday of the following week to reach settlement. This was before the bourses moved into the rolling settlement system on July 2, 2001, which restricted netting off of trade transactions to a day. From there, it has been a hectic 21-month journey.

It started at T+5 moved into T+3 in April 2002. Exactly a year later, SEBI has brooked not arguments to transcend to T+2 and joining a select league of emerging markets such as Taiwan and Korea. This is something even the big developed markets have been unable to do.

What has made this an act of bravado on SEBI's part is that all the technological trappings required for that ultimate seamless trading in the realms of T, preceded by T+1 are not in place. SEBI's detractors have been calling it a hasty move. But the fact remains that nothing happens here unless pushed to the edge.

(The author is the Editor of Sify Finance. The views expressed here are her personal ones)

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