Continuing to reform India’s securities processing infrastructure, the country’s regulator, the Securities and Exchange Board of India (Sebi), has slated April 1 to shorten the settlement cycle from five days to three days.
The decision came in a brief statement issued late last month that requested comment from the country’s stock exchanges, depositories and brokerages on implementation. Last July, India ended its 125-year-old fixed-account settlement cycle–thereby expanding the number of shares that must settle in a T+5 rolling settlement cycle to an additional 246 of the country’s most liquid shares. In 2000, Sebi opted to make 163 shares eligible for rolling T+5 settlement but those were primarily in small-cap, illiquid securities.
Several thousand remaining stocks were to have shifted to T+5 Settlement on Jan. 2, but Sebi moved up the timetable to Dec. 31, 2001 at the request of the Mumbai Stock Exchange, which cited possible operational problems with the switch taking place in the middle of the week. “They represented that smooth migration to settlement in such a large number of scrips from weekly settlement to rolling settlement is a huge exercise and would require at least 24 hours to complete the exercise,” said Sebi in a statement issued on Dec. 20, a day after it released its communique on T+3 settlement. So far, few details have been released as to how exchanges and other financial institutions will adjust to T+3, but observers agree that the change will help the market. “We have already seen an increase in volumes under a T+5 settlement cycle and are hoping for an even greater benefit from T+3,” said Viraj Kulkarni, securities country manager for Citibank Worldwide Securities Services in Mumbai.