There is a limit to which a machine can be loaded and this simple truth was not understood. Some savvy DPs heard the alarm bells ringing and froze fresh accounts. Others like SHCIL, went ahead and crumbled under severe transaction and account servicing pressure. By acknowledging the need to smoothen the system across all DPs, Sebi has sent out the right signal that what happened with SHCIL can happen to anybody. Now that the pay-in for institutional and non-institutional players has been staggered, the load on the system at a given time will lessen.

Sebi has also done well to hold its own againstpressure from sections of the market to push back demat deadline. This will send the right signals to investors waiting for the April 5 deadline when all Nifty and Sensex stocks go into mandatory demat trading mode. More than 90 per cent of the settlement at bourses would then go through in demat form. With a higher level of dematerialisation there are going to be new problems emerging.

The section of market which stands to lose out due to elimination of paper will look towards new ways to scuttle the system and Sebi has to brace itself for that. The regulator's failure to foresee a relatively simple glitch like the clogging up of the settlement system shows that it needs to be more aware of the problems which could arise as a result of dematerialisation.