According to market sources, NSDL and National Stock Exchange (NSE) have jointly approached SEBI to make it compulsory for individuals to settle their trades in the demat form for the eight stocks which were first identified for compulsory demat trading by SEBI.

Given the success of paperless trading so far, NSE deputy managing director Ravi Narain explained that under the Depositories Act an individual can hold shares in the physical form.

However, an exchange can make it compulsory to settle trades only in the demat form. This, according to market sources, is the proposal put forth to SEBI.

NSDL managing director CB Bhave confirmed the move, while explaining that the proposal would be studied by SEBI in the light of the demands made by individual investors to receivetheir shares in the demat form.

"When SEBI's diktat was implemented on April 6, market participants who received the first tranche of demat securities passed on this lot to their clients. However, realising the importance of holding demat shares the second settlement prompted them to hold on to demat shares," explained Bhave.

He also said that the investors started insisting on getting their delivery only in the demat form from the next settlement onwards.

It may be recalled that the problems faced by BoI Shareholding in terms of delivery mismatch has also prompted the BSE to avail the benefits of trading in a paperless environment.

While at the BSE the first preference for providing dematerialised shares is given to institutions which include mutual funds and FIIs, the second priority is given to `vyaj badla' shares and third brokers.

"It is in our interest to go in for demat trading," said SEBI chairman DR Mehta. In the light of the success of compulsory demat trading, Mehta announced that about150 stocks would be added to the list of stocks in which institutions would be required to sell in the demat form only.