CBSE Class 12 Understanding the Rolling Settlement

Chapter 6 Understanding the Rolling Settlement

Learning Objectives:

After reading this chapter, you should be able:

1. To identify the various segments into which the market is divided.

2. To recognize the activities performed at various stages of trading, clearing, settlement and post settlement in various markets.

3. To apply the knowledge of the working of the market in real life situation.

4. To examine the present system in the light of historical perspective.

Your guide engine to learning:

6.1 Introduction

6.2 Trading Activities (T day)

6.2.1 Opening of Trading Account

6.2.2 Placing the Order to Buy/Sell

6.2.3 Collecting Charges

6.3 Clearing Activities (T+1 day)

6.3.1 Unilateral Netting

6.3.2 Multi lateral Netting

6.4 Settlement Activities (T+2 day)

6.4.1 Pay-in and Pay-out of Funds

6.4.2 Pay-in and Pay-out of Securities

6.4.3 Direct Pay-out to Investors

6.5 Post Settlement Activities (T+3 to T+9 day)

6.5.1 Auction

6.5.2 Close-out Procedures

6.1 Introduction

As we have already read in the previous chapter, that under rolling settlement, all trades executed on a trading day are settled X days later. This is called ‘T+X’ rolling settlement, where ‘T’ is the trade date and ‘X’ is the number of business days after trade date on which settlement takes place. The rolling settlement prevailing in India is T+2, implying that the outstanding positions at the end of the day ‘T’ are compulsorily settled 2 days after the trade date. 

Rolling settlement was first introduced in India by OTCEI. As dematerialization took off, NSE provided an option to settle the trades in demat securities on rolling basis. In January 2000, SEBI made rolling settlement compulsory for trades in 10 scrips selected on the basis of the criteria that they were in the compulsory demat list and had daily turnover of about Rs.1 crore or more.

SEBI reviewed the progress of rolling settlement in February 2000. Consequent on the review, SEBI added a total of 156scrips under rolling settlement. Scrips that trade on any of the exchanges and had signed agreements with both the depositories were included for compulsory rolling settlement from March 21, 2000.

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