sebi: T + 1 regulations, tighter margins will make markets more secure: Ajay Tyagi

Bombay: The decision by the Securities and Exchange Board of India (Sebi) to switch to a shortened trade settlement cycle and implement stricter margin standards will make the Indian stock market safer and will be in the best interests of all. market participants, said President Ajay Tyagi.

“The transition from T + 3 to T + 2 took place in 2003. It is necessary to reduce it further now because there have been significant reforms in payments and the banking system. Investors have the right to receive what they buy as quickly as possible, ”Tyagi said in a media interaction after addressing the CII Financial Markets Summit on Thursday.

Foreign portfolio investors opposed the move, saying it would lead to operational problems.

Tyagi said the regulator has allowed the settlement cycle to move to T + 1 in a phased manner with REIT concerns in mind.

“REITs have been investing in the derivatives market since 1999, where upfront payments are required. In addition, they invest in the IPO market where the money is locked in for nine days. Even the US clearinghouse has launched a discussion paper to move towards a T + 1 settlement. This is something that is desirable for everyone, ”Sebi chairman said. He added that REITs need to do some soul searching.

Earlier this month, Sebi proposed to introduce a “Trade plus one” (T + 1) settlement cycle from January 1, where trades will be settled the day after the trade is completed. Initially, exchanges can choose which stocks they want to offer settlement for the next day.

Under T + 1, the buyer would get the shares on the mat account and the seller the sale occurs the day after the trade. Currently, transactions are settled two business days after execution.

Regarding the stricter margin standards, Tyagi said there has been a significant increase in individual investor activity in the market and their margin money should be used for their transactions.

“The new maximum margin standards are in everyone’s interest. An investor’s margins should not be used for others or for proprietary trading by brokers. With the increased participation of retailers, higher margin standards will give us peace of mind and assurance that nothing will go wrong, ”said the head of Sebi.

On September 1, the fourth and final phase of maximum margin standards came into effect, where brokers must collect 100% margin to initiate intraday positions.

On Thursday, CII asked Sebi to reconsider its decision to mandate listed companies to split the roles of chairman and chief executive officer before the April 2022 deadline.

Responding to industry demand, Tyagi said: “One can understand the argument that this should not be made mandatory, but to suggest that the two people can be related to each other is not. acceptable. If they (the CEO and the President) are related, then what is the relevance of separating them.

Listed companies were initially required to comply with the Sebi rule on the distribution of the roles of chairman, managing director and managing director from April 1, 2020. Sebi postponed its implementation after the industry demanded time.

When asked if there was a bubble in the stock market, as RBI pointed out, Tyagi said, “The high P / E ratios that prevail bet on earrings to improve in The near future. The related question is how the excess liquidity in the system would be managed by central banks, including the timing and pace of unwinding. The level of inflation is another factor to watch. ‘uncertainty, it is difficult to predict the inflection point.