Rolling settlement set to commence from January 10, 2000
Prior to introduction of rolling settlement in India, when account period settlement of trades was placed at 15 days interval, one of the shortcomings of the clearing and settlement process of the Indian stock markets was the absence of system to reduce counter-party risk. Managing this risk is essential for the safety and efficiency of the market. To ensure an effective clearing mechanism, the SEBI during 1997-98 had advised all stock exchanges (during this time, there were 22 stock exchanges in the country) to set up clearing houses and settle all transactions through the clearing house only and not directly between members, as was practiced earlier. The stock exchanges were also required to necessarily complete their settlements within seven days and to conduct the auction immediately i.e. not later than eighth day. Subsequently, this period was reduced to weekly cycles (5 days) and rolling settlements is a logical extension of further shortening of the trading and settlement cycles. Accordingly, for the first time, rolling settlement was introduced by the SEBI by making it optional for dematerialised shares on T+5 basis. Subsequently, SEBI set January 10, 2000 for commencement of rolling settlement in a phased manner, starting with ten scrips having sufficient liquidity with daily turnover of rupees one crore.
