The proposed move, which was issued today by Sebi as a 'discussion paper' inviting public comments, might also have a bearing on sale of pledged shares by large brokers or financiers which often leads to a panic-selling in the market.
Sebi said the current regulatory framework for mitigation of margin-related risks to clearing corporations has ‘given rise to another risk -- the risk of clients losing their collateral in the event of default/bankruptcy of the broker or TMCM, and accordingly there is a need to take steps to mitigate this.’
"Further, the overall risk in the system is dependent on the number of unsettled trades in the system at any point of time.
"A shorter settlement cycle can go a long way in reducing the risk in the system," Sebi said in the paper, titled 'Risk Management -- Safer Markets for Investors'.
The regulator said the extant system of risk management could be fine tuned for more efficient use of capital and enhancing safety of investors.
For the same, Sebi has broadly proposed three steps -- incentivising Internet Based Trading models posing minimal risk, mitigation of risk to client collateral, and T+1
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