BSE Gets Bullish On T+1 Initiative
BSE is planning a major technology leap that will effectively shift its entire architecture from the present T+2 system to T+1, allowing trades to be settled within a day’s time.
Speaking to CXOtoday, S.B. Patankar, director - information systems, BSE (The Stock Exchange, Mumbai), said, We plan to go live with our Straight Through Processing (STP) initiative on 1st July, 2004. The move will provide a standard means of communication for all institutional transactions. All communication between the stock exchange, brokers, custodians and institutional investors will be now carried out in a standard fashion, using a common messaging protocol. This is our first concrete step towards a complete T+1 architecture, and using the ISO 15022 messaging protocol will ensure that everyone shares the same communication standard.
T+1 is a system that ensures the settlement of funds and securities a day after the trade is made. Patankar explained, For example, if a person makes a trade by purchasing shares today, it is possible to get the payment cleared the next day itself.
The Stock Exchange operates through two websites: BSE India and BSE Webx. The former is an information portal exclusively designed for providing stock prices to investors. Webx is an exchange enabled Internet trading solution offered by BSE that provides end to end capital market services for all market participants.
By logging on to the BSE Webx site, investors can trade directly based on the parameters and framework setup by brokers. We have 300 users currently registered on the site, and all trades are protected with a secure mode of transmission based on 128-bit SSL encryption and digital certificates, explained Patankar.
We also plan to create payment gateways compatible with major banks later this year. Depository gateways are already in place with CDSL and NDSL, and we are moving towards our objective of reducing the trade time to a spilt second. Reserve Bank of India (RBI) is already working on Real Time Gross Settlement (RTGS) and Electronic Fund Transfers (EFT), and we are working towards making our payment system as efficient as possible, concluded Patankar.
With the current T+2 operation, payout of funds and securities take place on the second day following the day of trade. However, the shortening of the processing cycle is being seen as an unnecessary burden on sub-brokers by industry watchers.
While T+1 will definitely put India on par with global operators, what remains to be seen is whether the investor community embraces the concept or not.