Rolling Settlement
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Rolling Settlements
Pradeep Kumar MBA 3rd Sem
Definition
Rolling Settlement is a mechanism of settling trades done on a stock exchange on T i.e. trade day plus "X" trading days, where "X" could be 1,2,3,4 or 5 days.
The rolling settlement prevailing in India is T+2
History
• Earlier Indian Stock Market was operating on the Accounting period Basis.
•
• •
Rolling settlement was first introduced in India by OTCEI.
In January 2000, SEBI made rolling settlement compulsory for trades in 10 scrips . It was further revised by SIDBI & in Feb 2000 SEBI added a total of 156 scrips under rolling settlement. Following Finance Minister’s Shri Yashwant Sinha announced on March 13, 2001 that the rolling settlement would be extended to BSE-200 list would be traded only in the compulsory rolling settlement on all the exchanges from July 2, 2001. SEBI mandated rolling settlement for the remaining securities from December 31, 2001. SEBI introduced T+5 rolling settlement in equity market from July 2001. T+3 in April 1, 2002 and T+2 in April 1 2003.
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• •
Advantages
• Reduced transaction time.
•
• • •
Better price discovery.
Low market volatility. Reduced settlement risk. Uniform trading cycle.
Rolling Settlement Cycle
Activity Trading Clearing Rolling Settlement Day Download of obligation of members/custodian by NSCCL. Custodial Confirmation Delivery Generation - Members receive obligations to be fulfilled. Settlements Members give instructions for paying – in of securities i.e. move securities in the settlement A/c of NSCCL Securities and Funds pay in closing prices. T + 2 Days By 10.30pm At 11.00 am Day T-Day T + 1 Days By 1.30pm Timing
Securities and Funds pay out. Valuation of shortages based on T+1 closing prices Post Settlement Auction Bad Delivery Reporting Auction settlement Rectified bad delivery pay-in and pay-out Re-bad delivery reporting and pickup Close out of re-bad delivery and funds pay-in & pay-out T+3 days T+4 days T+5 days T+6 days T+8 days T+9 days
At 1.30 pm By 2.30 pm
Clearing Activities
• Reduced transaction time.
•
• • •
Better price discovery.
Low market volatility. Reduced settlement risk. Uniform trading cycle.
Cycle Diagram
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Cycle Name
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3-D Pie Chart
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LOGO
Rolling Settlements
Pradeep Kumar MBA 3rd Sem
Definition
Rolling Settlement is a mechanism of settling trades done on a stock exchange on T i.e. trade day plus "X" trading days, where "X" could be 1,2,3,4 or 5 days.
The rolling settlement prevailing in India is T+2
History
• Earlier Indian Stock Market was operating on the Accounting period Basis.
•
• •
Rolling settlement was first introduced in India by OTCEI.
In January 2000, SEBI made rolling settlement compulsory for trades in 10 scrips . It was further revised by SIDBI & in Feb 2000 SEBI added a total of 156 scrips under rolling settlement. Following Finance Minister’s Shri Yashwant Sinha announced on March 13, 2001 that the rolling settlement would be extended to BSE-200 list would be traded only in the compulsory rolling settlement on all the exchanges from July 2, 2001. SEBI mandated rolling settlement for the remaining securities from December 31, 2001. SEBI introduced T+5 rolling settlement in equity market from July 2001. T+3 in April 1, 2002 and T+2 in April 1 2003.
•
• •
Advantages
• Reduced transaction time.
•
• • •
Better price discovery.
Low market volatility. Reduced settlement risk. Uniform trading cycle.
Rolling Settlement Cycle
Activity Trading Clearing Rolling Settlement Day Download of obligation of members/custodian by NSCCL. Custodial Confirmation Delivery Generation - Members receive obligations to be fulfilled. Settlements Members give instructions for paying – in of securities i.e. move securities in the settlement A/c of NSCCL Securities and Funds pay in closing prices. T + 2 Days By 10.30pm At 11.00 am Day T-Day T + 1 Days By 1.30pm Timing
Securities and Funds pay out. Valuation of shortages based on T+1 closing prices Post Settlement Auction Bad Delivery Reporting Auction settlement Rectified bad delivery pay-in and pay-out Re-bad delivery reporting and pickup Close out of re-bad delivery and funds pay-in & pay-out T+3 days T+4 days T+5 days T+6 days T+8 days T+9 days
At 1.30 pm By 2.30 pm
Clearing Activities
• Reduced transaction time.
•
• • •
Better price discovery.
Low market volatility. Reduced settlement risk. Uniform trading cycle.
Cycle Diagram
Add Your Text Text Text
Text
Cycle Name
Text Text
3-D Pie Chart
TEXT TEXT TEXT TEXT TEXT TEXT
