Securities and exchange board india sebi the market regulator india
FAQ's ON ROLLING SETTLEMENTS
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What do you mean by T+5, or T + 3…. What is 3 or 5?
What are the advantages of Rolling Settlements compared to weekly settlements?
Since, in the Rolling Settlements, the trades are settled earlier than in account period settlement, the settlement risk is lower. The reason for this could be that in weekly settlements, the cumulative position built up over various days was consolidated, netted and settled on a single day. This resulted in higher deliveries to be settled for the trades done during the week. Since in Rolling Settlements, trades on a particular day are settled separately from the trades done on any other days, the settlement risk is considerably reduced. Moreover, the sellers and buyers get the monies and securities for their sale and purchase transactions, respectively earlier than in Account Period settlements. This also achieves international best practice for settling trades.
Yes, since the trades done during a day in a Rolling Settlement except those in scrips in "Z" group are netted, one can square off the transaction on that day only. The trades in "Z" group scrips are not allowed to be netted and are settled on a trade to trade basis. As such, the squaring off should be done before close of the market hours on that day. It may be clearly understood that the trades during a day cannot be squared off or netted with transactions on the earlier or subsequent days.
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The investors while trading in "Z" group scrips should, therefore, exercise caution while indicating "Yes" for the above message.
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How to identify the scrips which are settled with compulsory demat delivery in the Rolling Settlements?
What is the margining system in Rolling Settlements?
For the trades in CRS, Value at Risk (VaR) based margining approach has been adopted. In the VaR system of margining, historical volatility of scrips and overall market volatility represented by Sensex (at BSE) is considered to arrive at a VaR margin percentage for a scrip. As the scrips traded on the Exchange are divided into following two groups for calculation of VaR margins as per the SEBI directive, VaR margins are to be calculated depending on the group to which the scrip belongs.
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What happens if one fails to submit shares sold?
- 20% above the closing price on a day prior to the day of auction.
However, in case of the close- out of the shares under objections, shortages in the trades done in "C" group or "Z" group where the auction rate is not available, 10% above the closing price on a day prior to the day of auction is considered instead of 20% for calculation of the close- out price for scrips in other groups.
What happens if one buys shares on one day and sells the same on the following day and does not get delivery of shares purchased?
The pay-out of the shares purchased would take place on T+3 day. In case, an investor does not receive the shares purchased on account of non- delivery by the seller, he may receive the same in the auction pay-out on T+5 day. In case one has sold the shares on the next day, the pay-in of these shares would become due on T+4 day. This would lead to mismatch in delivery obligations for sale transactions, which became due on T+4 and receipt of the shares purchased via auction would happen on T+5 day. Hence, the sale transaction due on T+4 day would result into a failure and the shares not delivered would be auctioned or closed-out
How is the No-delivery fixed in Rolling Settlement?
The Stock Exchange announces a No-delivery period in scrips on the basis of intimation from the companies about Book Closure (BC)/Record Date (RD). During the period of No-delivery, the settlement of purchase/sale transactions is not effected. No-delivery period for various scrips is indicated in the settlement calendar of BSE (generally No-delivery period is for one week). The transactions in the scrips done at the Exchange during the No-delivery period are netted and settled in the settlement in which the scrips come out of No-delivery.
The No- Delivery system has till now been used to ensure that the trades takes place at the prices which are reflective of the corporate benefits attached to the securities traded. The Exchanges have decided to abolish No-Delivery for the scrips which are traded on compulsory demat form and Book Closure or Record dates have fixed by the companies for corporate benefits like bonus dividend and where no corporate benefits are attached. This would come into effect from May 1, 2002. In such cases the Exchange would announce an Ex- date and the investors should quote the prices for the concerned scrips assuming the corporate benefits are not attached from that date onwards. However, the No- Delivery would continue to be applicable for all scrips where physical shares can be delivered and/or where the corporate benefits are other than referred to above.
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