``We are far behind and we need to move faster,'' was how BSE president Anand Rathi reacted to Sebi's announcement of introduction of rolling settlement by December. With just three months to go before the new system is introduced, NSE managing director R H Patil does not see any problem in introducing the facility by December.

Rolling settlement will make the markets far more attractive to the foreign institutional investors. Demat has already demonstrated the positive effect a faster settlement system had on the FII inflows.

Initially, 10 scrips will be selected for rolling settlement and the facility confined to institutions. The top 10 scrips by turnover are likely to figure in this list with the likely candidates being Reliance, SBI, Satyam etc. ``Scrips which have adequate liquidity and where public interest is large are likely to be selected for rolling settlement,'' says M R Mayya, chairman of Inter-connected Stock Exchange. Mayya is also a member of the committee which will work out the modalities of the introduction of rolling settlement.

Contrary to the general perception, rolling settlement and badla can go hand in hand. ``Badla can co-exist with rolling settlement. All that it would need is some changes in the existing software and there could be daily badla instead of the present weekly badla,'' says Patil. Badla in a modified form can work even with rolling settlement, feels Rathi.

``I'm confident the badla system will still be there, for the market wants a carry-forward system to remain in place. However, the badla system in a rolling settlement era may not be in a present form, what we would have in place would be most-probably a more complicated one,'' says a city-based broker.

But the BSE president strikes a note of caution: Infrastructure needs have to be met. ``The number of transactions will increase by three to four times at every stage -- brokerage, clearing house, depository participant,'' he points out.

The work load of DPs will increase with shares being sent every day. ``Demat settlement process has to be streamlined with DPs connected live to the depositories from various centres,'' he adds.

The other hurdle to be cleared is the electronics funds transfer. ``We now have electronic transfer of shares. Under rolling settlement we need to have electronic transfer of funds as well,'' says Mayya.

``I don't see any problem in introducing rolling settlement by December. Initially, there could be some minor difficulties as is experienced during the introductory phase of a new system, but I strongly believe this can easily be overcome. Rolling settlement is sure to help increase the daily trading volumes, attract more FIIs and would curb excessive speculation in the markets,'' points out Patil.

``Since rolling settlement is an internationally accepted practice, introducing it in the Indian market augurs well for us. As and when this is introduced, we expect the FIIs to feel more comfortable with the settlement system here and we could see increased trading volumes on the bourse,'' says Deven R Choksey at Kisan Ratilal Choksey Shares & Securities.

But will the rolling settlement be made compulsory? ``The option is left to the investor depending on his needs,'' feels Mayya. The need for funds and the perception about the price movement of a scrip will determine the preference for either of the facility -- badla or rolling settlement. A BSE broker is however sceptical of the new programme set by the market regulator. ``I am afraid we are not ready. The mess we are into following compulsory demat without adequate preparation should not be repeated,'' he warns.

ROAD TO ROLLING SETTLEMENT