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Our Market Bureau
Mumbai, Dec 17: SEBI has decided to cut down the book closure period from 42 days to a week for those scrips which are in the mandatory demat trading mode. This implies that the long no-delivery periods which had become an opportunity for market manipulation will come down drastically. Mandatory demat trading in 60 top scrips will come into force on April 5. The first list of 12 scrips will come into effect on January 4.
Sebi will hold discussions with stock exchanges before issuing formal orders for the same. The decision to reduce the book closure period was taken after a meeting of top Sebi officials with compliance officers of the 12 companies which have been shortlisted for mandatory demat trading from January 4.
The rationale for the move is very simple. The long book closure period was a fallout of trading in a paper-based environment where time had to be granted for sending the shares and receiving them after the necessary changes in the title of the shares.
However, in an electronic system oftrading there is no need for such a long period as the shares have a clean title and are downloaded electronically to the company's registrar by the National Securities Depository Ltd (NSDL). In fact, experts said that once rolling settlements come into the markets, the entire concept of a book closure period will become redundant as settlements will take place daily and it would be electronically possible to hand over the details to the registar in just a day.
"This is a major decision that we have taken today keeping in mind the interests of investors. It will hit at manipulation and also provide greater liquidity to investors," said Sebi chairman DR Mehta. The no-delivery period was used by speculators to create an artificial price for a scrip leading to acts of manipulation.
Mehta said that all the 12 companies on the mandatory demat trading list have lauded the move and said that it would greatly benefit the system. They have said that they are well prepared to take their shareholders to the newsystem of trading and settlement of shares.
With a substantive part of shares being dematerialised, it was pointed out that the turnaround time for transfer of physical shares has also come down drastically. Sebi will hold a meeting with registrars and share transfer agents in January 1999.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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