The discussion was held in the backdrop of uniform settlement cycle becoming operative in respect of participating stock exchanges of the Inter-Connected Stock Exchange of India (ICSE). Currently, different exchanges follow different trading patterns and dealers engage in arbitrage trading to take advantage of different settlement periods.

The committee recognising that the implementation of uniform settlement cycle to other stock exchanges would have implications in terms of availability of infrastructure, particularlywith custodians and depository participants (DPs), abstained from taking any decision. For further examination of the issues involved, the regulator has decided to convene a meeting of the major custodians and DPs.

The committee which met on Monday also decided to call for a meeting of the major custodians and depository participants in the near future in order to address issues related to infrastructure. "It was however felt that such a measure will have implications in terms of liquidity, carry forward mechanism, availability of alternative hedging mechanism in the form of derivatives," said the chairman of the committee, MR Mayya.

"We need to ensure liquidity in the system hence the committee felt that this issue needs to be studied separately," he added. Representatives of exchanges in Mumbai, Calcutta and National Stock Exchange and custodians like BoI Shareholding, Stock Holding Corporation of India and Canara Bank participated in the discussions held on Monday.

The committee noted that shares of64 companies are now being traded compulsorily in the dematerialised form and by May 31, 1999 the number will increase to 104 to include the most actively traded shares. In the light of these discussions it is learnt the committee discussed the implementation of one common settlement cycle for the smaller exchanges and one for the larger exchanges vis a vis the introduction of rolling settlement for the shares which are being traded in the demat form.

Interestingly, the committee also recognised that the introduction of uniform settlement cycle to other stock exchanges has implications in terms of availability of infrastructure, particularly with the custodians and the depository participants. Hence the committee decided to call for a special purpose meeting with the major custodians and depository participants in order to take care of these issues.

According to committee members the uniform settlement framework which is already operative in respect of the inter connected stock exchange was also notedduring the discussions.