Non-outright trades to continue on gross basis; securities settlement unchanged
In a recent announcement, the Securities and Exchange Board of India (SEBI) has decided to continue with the current system of non-outright trades on a gross basis, while keeping the securities settlement process unchanged. This move has been welcomed by market participants and is seen as a positive step towards maintaining stability and transparency in the Indian securities market.
Non-outright trades are transactions where securities are not delivered immediately, but are held by a custodian until the settlement date. These trades are commonly used in the Indian market for various purposes such as hedging, short selling, and arbitrage. The current system allows for these trades to be settled on a net basis, where the buyer and seller only exchange the difference in the value of the securities. However, there have been discussions in the past to move towards a gross settlement system, where the actual securities are delivered on the settlement date.
After careful consideration, SEBI has decided to continue with the net settlement system for non-outright trades, citing various reasons such as operational efficiency, reduction in settlement risks, and cost-effectiveness. Moving to a gross settlement system would have required significant changes in the infrastructure and processes of market intermediaries, which could have led to disruptions and increased costs for investors. SEBI’s decision to maintain the status quo will ensure a smooth transition and avoid any potential market disruptions.
Moreover, SEBI has also decided to keep the securities settlement process unchanged, which means that the settlement cycle will remain at T+2 (trade date plus two days) for all securities. This is in line with international standards and will ensure consistency and harmonization in the Indian market. Any changes in the settlement cycle could have had a significant impact on market liquidity and volatility, which could have been detrimental to the overall health of the market.
SEBI’s decision to continue with the current system of non-outright trades on a net basis and unchanged securities settlement process is a testament to the regulator’s commitment to maintaining a stable and efficient market. This move is in line with SEBI’s objective of promoting investor confidence and protecting their interests. By keeping the settlement process unchanged, SEBI has also shown its commitment to the development of the Indian securities market and its integration with global markets.
Market participants have welcomed SEBI’s decision, as it will ensure continuity and stability in the market. The decision will also provide a level playing field for all market participants, as any changes in the settlement process could have favored certain players over others. With the current system, all market participants will be treated equally, and the market will continue to function smoothly and efficiently.
In conclusion, SEBI’s decision to continue with non-outright trades on a net basis and unchanged securities settlement process is a positive step towards maintaining stability and transparency in the Indian securities market. The move will ensure a smooth transition and avoid any potential disruptions, while also promoting investor confidence and protecting their interests. With this decision, SEBI has once again proven its commitment to the development and growth of the Indian securities market.
