JC Parekh, president of BSE while confirming the RBI's move, explained that the exchange received such a suggestion on November 14 and had accordingly sent in a fresh application.

``The settlement of trades has to be essentially in the rolling form,'' said Parekh, also highlighting that the exchange had no specific objective in making a request for the 14 day settlement cycle and therefore can easily switch over to the five day settlement.

The RBI had earlier in September sought clearance from the Finance Ministry to allow the BSE to kick off trading in government securities.

Since the application had been pending for over a year, in April 1998, RBI had forwarded the issue to Sebi. And Sebi, in turn, appointed Wipro to vet the online software designed by BSE, and passed on the clearance to RBI.For online trading in government securities, the exchange had sought RBI permission specifically since the exchange needed to open an SGL account with the central bank. It is also learnt that since RBI representatives were not convinced about the transparency in trades they forwarded the issue to Sebi for clearance. The ban on dealing in gilt-edged securities and government paper was on the grounds of lack of transparency in trades.

Opening of a SGL account with the RBI enables the institution to deal in government securities. Such institutions are also expected to open current accounts with the RBI to deal in the government dated paper and the other debt instruments, considering that the deals are transacted on delivery versus payment schedules.

BSE's debt market platform coined as G-Segment by the exchange was developed in house, way back in the last quarter of 1997 and was meant to be only a reporting software. However, BSE's top brass explained that the exchange plans to work on the software to implement it on an online basis once the segment kicks off its operations. This would also mean flashing of yield and maturity specifics about the particular instrument traded. This, according to sources, would be the first step towards the reintroduction of trading in government dated paper or debt instruments after it was banned in the wake of the 1992 securities scam. After the 1992 scam, BSE brokers were prohibited from trading in government dated securities. Further, the banks were also not allowed to transact any such deals on behalf of the BSE brokers. Earlier, it was learnt that about six BSE brokers had made an application to the RBI for opening of SGL account, which was set aside by RBI on the grounds that individual brokers, though a corporateentity, will not be allowed to trade in government securities.

However, the senior officials of BSE maintain that their approach would be to get an SGL account for the clearing house which would enable every member of the exchange to avail of the trading rights in government securities.

Currently, Bank of India is operating as the clearing bank for the exchange's capital market operations. The exchange has also forwarded a proposal seeking RBI's nod for approaching the SBI to act as the clearing house for trading in government securities.