At a crucial meeting called by Sebi representatives of NSDL, CDSL, NSCCL, NSE, BSE and BOI Shareholding it was agreed that both the depositories will adopt the CDSL model to effect inter-depository transfers, in addition to the model which is currently operational. The CDSL model seeks to effect on-market inter-depository transfer of shares resulting from settlement at the level of the clearing corporation or clearing house.

To effect these transfers, each depository would be required to open an account with the other depository and this account would be debited or credited based on the net inter-depository transfer iinstructions from the clearing house/corporation.

This model will be introduced in additon to the existing model which allows transfer of off-market deals. While the CDSL model does not require connectivity, both the depositories have to make changes in the software which will enable them to accept the intimation from the clearing house/corporation.

Sebi has asked the two depositories to make the software changes speedily for the adoption of the new model. The need for the change arises as the next round of compulsory demat trading begins from November 29. Besides, Sebi has set a target of introducing rolling settlement from the first week of December. A separate working group of Sebi is working on the stock selection and modalities of rolling settlement.

The CDSL model allows for settlement of on-market deals between the two depositories where the shares would be debited or credited as the case may be on intimation from the clearing corporation/house. Once this is done, the registrars will reconcile in their books the entries to match the position on settlement.

CDSL officials, arguing in favour of their model, contend that once the proposed compulsory demat trading of scrips in the next few months is implemented and the rolling settlement introduced the volumes on a daily basis would rise phenomenally. ``Inter-connectivity is a single point criticality and if it fails the settlement will fail. This is why we have suggested the model which involves the transfer process through the clearing house system,'' pointed out a CDSL official.

Meanwhile, the preparation for the next round of demat trading is on. The BSE governing council is learnt to have taken a view that all the companies in the A group have to sign up with both the depositories. BSE has asked the companies to sign up before October 31. BSE has issued a veiled threat to companies who fail to do so stating that it has the option of shifting them out of the A group. However, this may not be required as Sebi has already directed the companies to sign up with both the depositories.