Instantaneous settlement in the regulated securities market is essential in order to compete with asset classes such as cryptocurrency which offers instant liquidity and other conveniences, Securities and Exchange Board of India chairperson Madhabi Puri Buch said today.

Also read: Crypto trading volumes on Indian exchanges hit a 10-month high

If the regulated markets do not move in this direction, there is a good chance that funds will move away from the regulated markets towards crypto and similar assets, she said. Cross-border asset classes that operated outside regulated markets had the advantage of anonymity, tokenisation and instantaneous settlement. While anonymity was out of the question in a regulated market, it is possible to offer the other two, she said.

Settlement of trades optionally on T+0  basis is set to be launched in the Indian equity markets on March 28. This would mean that trades will be settled on the same day.

Buch said that the regulator was committed to introducing this in March, as said earlier. Instantaneous settlement of trades was also on the cards next year.

She said that the Indian markets were far ahead of other jurisdictions in faster trade settlement cycles.

Also read: CoinSwitch surpasses 2 crore registered users 

While Sebi has moved rapidly from T+2 to the current T+1 settlement cycle, and now plans to move to same day settlement, there has been criticism from some quarters, mainly foreign portfolio investors, who have been grumbling about the operational challenges involved in moving funds to comply with faster settlement cycles.

Buch said that there was a real concern that with crypto trades, digital and binary options available for investors a sizeable part of the market could migrate there, “which is a terrible outcome for our mutual funds, FPIs and other retail investors, who want to stay in the regulated markets.”

Tokenisation, where investors can take a small share in a big asset, is also something that the regulator is working towards such as introducing small and medium REITs, lowering the minimum investment in mutual fund SIPs and taking up the issue of fractional shares with Ministry of Corporate Affairs.

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