10 years of going demat: India way ahead of rest
US financial markets may be the largest in the world in terms of trading volumes and turnover value. But when it comes to e-trading and settlement, Indian markets are a step ahead of their counterparts.
By Gaurav Pai, TNN |
MUMBAI: US financial markets may be the largest in the world in terms of trading volumes and turnover value. But when it comes to e-trading and settlement, Indian markets are a step ahead of their counterparts.
It has been 10 years since e-trading began on the NSE. Today, the Indian stock market settles almost 100% of its trades in the dematerialised form. The 90s saw entry of several new participants in the markets, institutional and retail.
Prior to dematerialisation, investors had to wait days on end before they could lay their hands on the share certificates. Still, this was a small irritant considering that investors would often be saddled with bad deliveries and fake certificates. NSDL was conceptualised in 1996 to end all such problems for once.
“A financial market is always held back the weakest link in the chain,” says JR Verma, professor of finance at IIM, Ahmedabad, and ex-whole time member of Sebi. “After NSE began e-trading in mid-90s, the trading lag was eliminated. Now, removing the settlement lag became the next obvious step in market development. This led to formation of NSDL,” he explains.
Since then, except the temporary slowing in the opening of accounts in the bear phase around 2001-02, NSDL has never looked back. Till date more than 6,300 companies have joined NSDL and 233 depository participants service about 77 lakh investors through more than 3,200 locations across the country.
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Says CB Bhave, CMD, NSDL, “Although Sebi allows settlement of shares in the physical form, there is almost no activity on this counter. This shows the acceptance of demat from investors all over the country.” Over the years NSDL has introduced demat of debt-government securities, NSC, KVP and warehouse receipts. Even CDSL has close to 21 lakh demat accounts through 348 DPs. gaurav.pai@timesgroup.com
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