Offshore funds raise concerns over India’s same-day trade settlement plan

Celestial Asia Securities Holdings

12/01/2024 16:03

BENGALURU, Jan 12 (Reuters) - India's proposals for
same-day settlement of securities trades will be costly for
offshore funds and could fragment the market, according to a
lobby group for the funds. 
    The Securities and Exchange Board of India (SEBI) last month
proposed a phased rollout of optional same-day settlement and
sought views from the public before it finalised the rules. It
believes same-day settlement could benefit retail investors as
well as reduce margin requirements and default risks.
    However, two sources with direct knowledge of the matter
told Reuters in October that offshore funds feared the plan
could cost them more money and entail foreign exchange risk, as
they would have to buy rupees ahead of time in order to settle
trades immediately. 
    In its submission to the regulator, published on its
website, the Asia Securities Industry and Financial Markets
Association (ASIFMA) also warned optional same-day settlement
could fragment the market.
    It added that if the SEBI's ultimate goal was to move the
whole market to same-day settlement, it would be better to focus
on how it could do this with the least amount of disruption and
cost to the market.
    The SEBI did not immediately respond to an email seeking
comment.
    As a possible solution, ASIFMA asked the SEBI to consider
China's same day settlement systems, which allow offshore
investors flexibility in funding trades. 

 (Reporting by Jayshree P Upadhyay  Writing by Ashna Teresa
Britto in Bengaluru
Editing by Mark Potter)
 ((AshnaTeresa.Britto@thomsonreuters.com;))