SEBI chief moots real-time settlement of trades in stock market

SEBI chairman Ajay Tyagi has proposed to the stock exchanges to gradually move towards real-time settlement of trades in the share market. Speaking at a FICCI conference, Tyagi said he would like the exchanges to start with a trial or a pilot project for the same. He also proposed demat of G-Secs (Government Securities) to encourage retail participation in them.

“Exchanges, through the use of blockchain, should try real-time settlement in the stock market more seriously. They should go for it at least on a pilot or trial basis,” Tyagi said. He said the market has come a long way from the 45-day settlement of trades.

Currently, the settlement of trades in is done on a T+2 basis — that is, today plus two days, by when stock transactions should be settled with payment and delivery obligations.

Real-time would mean settlement the same day or even during trading hours. However, the specifics of how the system would work is still unknown. According to brokers, the T+2 settlement system encourages intra-day trading but real-time settlement would most likely mean immediate payment of cash and delivery of shares.

During the lockdown period since March as the stock market witnessed a sharp decline, retail participants, sensing an opportunity, have pumped in more funds than normal into the market. Tyagi noted that in June alone the number of new demat accounts opened jumped to around 10 lakh; it was around five lakh monthly during the pre-Covid period.

Invest in G-Secs

“Such huge retail participation is not a cause of concern but small investors, mainly those who are coming into the market for the first time, should start with investments into G-Secs and in a more gradual manner as it involves less risk. Demat of G-Secs would be a good step. Government will take a call on it. Corporates should be more upfront in sharing information since retail investors are showing faith in the market,” he said.

On the issue of overseas listing of Indian companies, Tyagi said there were income tax and FEMA (Foreign Exchange Management Act ) rules that need to be streamlined for this proposal. SEBI has already allowed Indian companies to list in other countries.

Among other things, Tyagi stressed on the need for more active players in the secondary bond market. On allowing stock brokers to work from home, Tyagi said, “So far during the lockdown period there has not been any big problem with regard to brokers working from home and no big defaults too.” He said SEBI would study this further.