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Sebi chief sees T+2 launch by April 2003

Renni Abraham & Janaki Krishnan

The Securities and Exchange Board of India chairman G N Bajpai has set a target of April 2004 for introducing T+1 settlement mechanism on the bourses.

In the run up to this, T+2 will be brought into force by April 2003. This will bring India on par with the US, which has set the same deadline for its exchanges to adopt T+1 settlement. Extracts from an interview:

Tell us about the proposed Central Listing Authority (CLA)...

CLA is needed because of various factors. Today, any company entering the market must adhere to certain listing requirements. Though the 24 bourses in the country have listing requirement models there is a need for a central authority to routinely update the norms.

Secondly, due diligence is essential. We have instances of some bourses failing on this part. Take the case of Home Trade. Despite being denied a listing on the National and Bombay stock exchanges, it got listed on the Pune Stock Exchange.

Once a company is listed, we have to ensure fair trading. For this, transactions must close fast. Problems arise when there are delays in closure. Even historically there were problems under badla and T+7.

How do you propose to solve this?

We are working towards ensuring a transaction closure as close to the transaction time. By 2004 we intend to bring this to T+1, which is the ideal level. This is currently not practised anywhere in the world. Even the US intends to shift to T+1 by 2004.

In India, we have come a long way from 15-day settlement to T+7 and, finally, to T+3 since April 2002. Now we are on par with exchanges of developed nations.

In preparation for T+1, we intend to achieve a T+2 level by 2003. The need of the hour is to synchronise settlement cycle so that real time gross settlement is achieved. We have approached the government in this regard as this is basically a banking issue where the central bank will have to be involved.

Sebi is also trying to put in place a surveillance mechanism to monitor the real time of transactions.

What efforts are on to bring about transparency in Sebi's functioning?

We are looking at a certain level of transparency in regulations. On this front, we have decided a few things.

All orders passed by the Securities Appellate Tribunal, either in favour or against Sebi, are being put up on Sebi's website since last week. All Sebi orders also will be posted on the site. Within a month, we intent to put up all orders passed over the last three years.

Similarly, all Sebi expert committee reports will be available on the site for three to four weeks to elicit comments and observations, after which a final decision will be taken.

What will be impact of the upcoming IPOs?

These public issues will boost both the primary and secondary markets. There are generally complaints that shares of good companies are not available. Now with these good floats the situation will be addressed.

Have corporates taken to governance norms?

This is one of the listing requirements which is ensured in two ways. Corporates are expected to submit compliance reports and are also required to provide details of the same in their annual reports.

The effort is to move from form to substance. We are also setting up a mechanism to measure wealth creation, wealth management and wealth sharing (for shareholders).

Isn't it true that only a fraction of Sebi-initiated actions against errant firms are upheld at appellate tribunals?

Sebi has constantly strengthened its surveillance mechanism. It is not true that only a few actions against erring companies are upheld. We enjoy a good percentage of endorsement by appellate bodies to our orders.

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