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SEBI to test carry forward in rolling settlement

India's market regulator will decide on bringing A-group shares under rolling settlement after studying the results of its proposed experiment to allow carry forward in 15 non A-group stocks in the current rolling list, a senior official said.

The A-Group comprises actively traded shares in which transactions can be carried forward from one weekly settlement to another.

Currently, 163 mid and small capitalised shares are traded in the compulsory T+5 rolling settlement, where transactions are settled on the fifth day after trade.

Securities and Exchange Board of India (SEBI) plans to bring all shares under rolling settlement in a phased manner.

Market participants have been apprehensive that the introduction of the 'A' group shares under rolling settlement will reduce liquidity.

"We reviewed the status of rolling settlement and the feedback from the stock exchanges is that there has been a significant fall in volumes, liquidity and deliveries in stocks in the mandatory rolling settlement," SEBI Senior Executive Director Pratip Kar told reporters.

He said SEBI had decided to test the waters by introducing the carry forward facility to 15 shares with a market capitalisation of more than two billion rupees each and which are already under the rolling settlement.

Kar said the trial will be implemented when stock exchanges are ready with their software.

He said SEBI will introduce facilities like the automated lending and borrowing mechanism, continuous net settlement and carry forward for the 15 shares.

The automated lending and borrowing mechanism allows investors to meet their settlement obligations by borrowing shares or funds in a special session.

The 15 shares are Gas Authority of India Ltd, Morepen Laboratories, VisualSoft, Global Trust Bank, Aftek Infosys, Pentasoft Technolgoies, Lupin Labs, BFL Software, Kotak Mahindra Finance, Sundaram Clayton, Sri Adhikari Bros, Orchid Chemicals, Essar Steel, Chambal Fertilisers and IndusInd Bank.

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