Currently, both the exchanges give the first priority to institutions in terms of receiving demat shares delivered in the physical segment. In the case of BSE, the second priority is for `vyaj badla' shares and the third for brokers.

On the other hand, the NSE gives second preference to brokers. According to depository sources, brokers, who are gradually learning about the merits of a paperless environment, have requested the exchanges to amend the priority structure in their favour.

While NSE agrees to a change in the structure, it feels that the reach of the depository participants (DPs) needs to be strengthened before sucha move can be initiated.

BSE, on the other hand, also feels that the priority list can be amended, but in favour of `vyaj badla' first, to be followed by brokers and institutions.

"At the time when the priority list was drawn out brokers were not so enthused about receiving demat shares. It was for this reason that we put institutions on the first priority. Now that the mood is different we would be willing to change the priority order provided the Department of Telecommunications (DoT) allows connectivity between branches of depository participants and the NSDL," said NSE deputy managing director Ravi Narain.

"In the absence of this, the reach of the DPs is not enough and it is therefore not fair to get into a situation where an investor gets a demat share but does not have the ability to open a DP account. We will change the order the minute we feel that the DP network has expanded substantially," said Narain.

Sources in BSE indicated that the exchange is considering a change in the prioritystructure in favour of `vyaj badla' shares. The exchange is keen to get rid of all the `vyaj badla' shares lying with the clearing house. It has decided to this by routing demat shares to the clearing house as `vyaj badla' shares. The exchange has in two sessions managed to deliver one crore demat shares as `vyaj badla' shares.

However, according to BSE executive director RC Mathur, the exchange has decided not to amend its priority list as of now. "Convinced about the merits of dealing in demat shares, especially in the book-closure period where the price advantage also accrues to them, brokers have been making representations for the change in the list. However, we have decided to continue with the practice of conferring the first priority to institutions," Mathur explained.

According to a section of brokers, since it is mandatory for institutions to trade in demat shares in some scrips, the list of which is only going to be expanded further, it makes sense to broadbase the list by giving priority tobrokers to get delivery of demat shares first.