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SEBI dismisses rolling settlement buzz

Janaki Krishnan/NetScribes

The Securities and Exchange Board of India on Thursday dismissed as rumour the report that rolling settlement in forward scrips would be delayed off the block. This report had lent a buoyancy, however slight, to the capital markets on Wednesday.

"We had never given them a time, nor had we specified any phased period over which the scrips would be introduced. So where is the question of delay?" said J R Varma, a full-time member of the SEBI board.

In August this year, SEBI had asked BSE and NSE to give a deadline by which they would be ready with the necessary software. Both the bourses had indicated a time limit of November for rolling settlement in carry forward scrips, but they had asked for more time for introducing continuous net settlement (CNS).

Varma made it clear that CNS and rolling settlement in the high-volume scrips could be introduced only when the stock exchanges were fully prepared. In the absence of any deadline set by the securities watchdog, there was no question of a schedule being adhered to.

SEBI officials said that even after the software was in place, the exchanges would have to set up the necessary risk management measures, which by itself could take up to a month.

SEBI is in still working on a suitable margin format for scrips under rolling settlement. "We are carrying out simulation exercises right now," said Varma. The Wednesday meeting had been devoted to assessing the effect of margins on trades conducted under the rolling mode, he said.

Wednesday's rumour and its reaction are however indicative of a larger issue - the fact that the brokers are dreading the day when all their favourite stocks would go into rolling settlement. Rajesh Pai of Prime Securities said, "The market is already down. There does not seem to be any driver for the market to go up. Rolling settlement at such a time will only further depress volumes."

Rolling settlement requires compulsory delivery at the end of a settlement period, unless trades are squared up on the same day. The fear is that with speculators unable to build up positions, liquidity will be low, pushing stock prices into a narrow groove.

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