To determine the time schedule for T+2 rolling settlement SEBI had held several rounds of consultation with all the market participants and based on the consensus, decided to introduce T+2 rolling settlement in Indian equity market from April 1, 2003. The calendar of events / activities in T+2 rolling settlement were disclosed to the market on January 3, 2003 to give sufficient advance notice to the market and the market participants to adjust to T+2 rolling settlement by the designated timeframe of April 1, 2003.
SEBI had also posted the report on the implementation of T+2 rolling settlement on its website to bring in transparency in its policy making and provide an opportunity for the investor populace to voice their comments on the implementation time schedule for T+2 rolling settlement. SEBI received various comments and opinions on the report. The comment in general was favorable and it was found feasible to implement T+2 rolling settlement by the designated date of April 1, 2003. However the following issues which are not the pre-requisites needed to be addressed:
- Vibrant and economical electronic fund transfer facility
- Widening the scope of STP
- Issue of electronic contract notes
The exchanges and depositories confirmed at the meeting that the necessary systems were implemented to achieve T+2 rolling settlement as per the agreed schedule and necessary instructions had already been issued to brokers and depository participants. The market participants also confirmed their preparedness in implementing T+2 rolling settlement by April 1, 2003.
To facilitate a vibrant and economical funds transfer facility, the Reserve Bank of India (RBI) proposed to implement a new EFT system called Special Electronic Fund Transfer (SEFT) on April 1, 2003 to coincide with the launch of T+2 rolling settlement on the same date. SEFT would function through electronically networked branches of various banks and there are 2,500 branches of 24 banks in 496 centers that are networked and linked to SEFT with at least one bank branch at each of these centers. SEFT would enable transfer of funds inter-bank from one branch of a bank in one location to another branch of the same / another bank in the same / another location in a maximum period of two hours. It was also indicated that charges for the facility would be competitive and comparable with the existing bank charges for funds transfer. There is no minimum limit on the amount to be transferred to use SEFT, although there is an initial maximum cap of Rs. 2 crores1per transfer. However to transfer an amount larger than Rs. 2 crores in the same settlement, multiple transfers at a time are permitted. To facilitate the dissemination of SEFT enabled bank branches, RBI has posted the list of center-wise banks and branches. Any non-co-operation by a bank branch that is a part of SEFT, for execution of EFT instructions, should be brought to the notice of RBI.
The inter-operability issues between the STP service providers are being worked out and a solution would be provided in the near future. On successful implementation of inter-operability between the STP service providers, STP could be mandated at least for all institutional trades to begin with.
SEBI had earlier permitted the issue of electronic contract notes in lieu of physical contract notes. As regards the storage requirements, SEBI is in the process of formulating a paper which would lay down the operational modalities and the procedure for the storage of contract notes electronically in lines with the Information Technology Act.
It was also agreed at the meeting that the exchanges would generate a unique code for Mutual Funds and each scheme of a Mutual Fund, Foreign Institutional Investors (FIIs) and their sub-accounts. This would require the exchanges to put in place adequate systems and carry out software changes as required. The exchanges are provided with three months time to implement the system. The exchanges have been informed that till the time, the required system to issue unique client code to FIIs, sub-accounts, mutual funds and its schemes are put in place by the exchanges, the present practice of putting client IDs at the time of order entry in case of FIIs and mutual funds shall continue.
All the market participants unanimously agreed at the meeting that they were prepared to implement T+2 rolling settlement by April 1, 2003
. The Indian securities market moving seamlessly from T+3 rolling settlement to T+2 rolling settlement would be another milestone in the journey of finally achieving T+1 rolling settlement.
12 crore = USD 416667
