Mumbai: Sebi Market Regulators and Brokers at Dalal Street are currently dealing with the trade process in the stock market.
Sebi’s pain to continue with very high margin requirements for all types of cash trading, called peak margins, has been filled with strong resistance from the broking community.
Because the problems related to margins are being discussed between regulators and brokers, Sebi decided to move to the shorter T + 1 settlement cycle than January 1, 2022.
On the second problem, even though it will begin next year, foreign investors have handened hands with brokers, Said that post-traded procedural time slowness can cause obstacles to switching to a shorter settlement cycle.
Without a visible solution, this problem has reached the Ministry of Finance and may even land in court, said industry sources.
The source in the supervisory body said that the two decisions were taken to make the Indian market a safer and better place.
For one, the requirements for peak margins will not affect investors who buy to survive for the long term.
“Trading might be a little expensive for traders a day,” said a source.
In addition, the regulatory steps to slowly shift to the T + 1 settlement cycle will be useful for traders who buy with the aim of making some advantages in one or two days.
Under the current T + 2 settlement system, the buyer gets the shares he bought on the Demat account on the third business day, including trading days.
Similarly, sellers receive money for shares sold on the third business day.
Under the proposed T + 1 settlement cycle, shares and money will come to the next working day investor account.
Regulators believe that moving to the T +1 settlement cycle is perfectly in line with the initiative of Prime Minister Narendra Minister Narendra Modi.
Foreign funds are contrary to moving to a shorter settlement cycle because they have to change their resolution process involving their own people, guards in India, as limited, clearing companies and banks, to meet needs.
On the other hand, the regulator believes that since the T + 1 cycle will initially become optional for shares that exchange select, if the trading volume in the stock does not match the current T + 2 cycle, the exchange will automatically return to a longer settlement cycle .
Over the past few months, Anmi, one of the Pan-Indian broker agencies, made some representations to Sebi.
This oppose the introduction of the peak margin and the T + 1.
Anmi settlement cycle has shown that the introduction of peak margins can increase market risk, defeating its objectives to reduce the same thing.
The broker’s body also said that if the T + 1 cycle was introduced, it would increase the terms of working capital for brokers, extending working hours to banks and deposits, and increased the risk of settlement due to failure in trading matched by FPI.
However, market veterans say that discount brokers stand to get the most of the proposed change, because this broker is relatively new, the operation is fully automated and digitized.
“The current situation presents a unique case: regulators and several brokers, rising technological progress in the financial room, trying to move forward.
On the other hand, foreign funds that use advanced technology to trade, want to continue using Legacy technology when it comes to trade settlement, “said a market observer.