India Regulator Rebuts Broker Concern on Shorter Settlement Rule
(Bloomberg) -- India’s capital markets regulator said recently introduced rules that quicken trade settlement and raise margin requirements are much needed changes, rebutting concerns raised by some local brokers and foreign investors.
The Securities and Exchange Board of India will allow stock exchanges to offer next-day settlement -- a key demand from fintech firms -- from January 2022 instead of just the two-day service in operation now. Higher margin norms, which took effect Sept. 1, mandate brokers collect 100% margins for intra-day positions.
“With the improvement in technology, payment systems and banking arrangement, T+1 is something which everyone should move toward,” Sebi Chairman Ajay Tyagi told reporters Thursday. “We are moving in a phased manner and so it is something which is in everyone’s interest.”
Asia Securities Industry and Financial Markets Association wrote to Sebi last month saying T+1 could add “unwelcome trading frictions” for foreign portfolio investors, the Business Standard newspaper reported. Global funds have cited operational challenges including time zone difference, forex-related issues and other technological bottlenecks. The concerns were echoed by brokerage body Association of National Exchanges Members of India, when Director Rajesh Baheti spoke to CNBC-TV18 last week.
Tyagi on Thursday said it has been nearly two decades since Indian exchanges moved to T+2 settlement and there is a need to further reduce the cycle. The higher margin rules add to the urgency to ensure investors’ margin money isn’t stuck for long, he said.
“Investors have the right to receive whatever they have purchased as quickly as possible,” Tyagi said. “Someone has to introspect.”
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