Sebi directive to bourses likely on uniform no-delivery time

Sudhir Shetty

Mumbai, Nov 4: THE Securities and Exchange Board of India (Sebi) is expected to soon direct the stock exchanges (SEs) to co-ordinate among themselves for a uniform no-delivery period that is in line with the now uniform settlement, pay-in and pay-out dates.

The no-delivery period, fixed by SEs, is a trading cycle ahead of book-closure or record dates for dividend payment, considering eligibility for rights or bonus issues, annual general meeting, etc.
To be eligible for these goodies offered by the company, investors must buy stocks before — and not during — this period. If they, however, do buy stocks during this period, they are not entitled to these goodies.

The need for a uniform no-delivery day on both The Stock Exchange, Mumbai (BSE) and The National Stock Exchange (NSE) has arisen after the introduction of (daily) rolling settlement system from July 2, wherein the settlement, pay-in and payout dates have been made uniform by the exchange authorities.

However, the crucial no-delivery period of both these exchanges have remained unchanged from the previous days of the badla system and, therefore, investors tend to loose their dividend income and even end up getting late payments for securities sold.
Responding to a query from The Financial Express, a top Sebi source said: “We are looking into the matter. We are aware that a lot of investors are facing problems because of the mismatch in no-delivery periods of the stock exchanges even when all the others aspects of both the exchanges are made uniform after the introduction of rolling settlement. The exchanges should, therefore, coordinate among themselves and have a common no-delivery period.”

Under the rolling settlement mode, the pay-in for trade transacted, say on Monday, on either the BSE, or the NSE, would be the following Monday. However, the no-delivery period has not yet been made uniform by the exchange authorities.

For example, the record-date for Hero Honda is November 7, for a special interim dividend of 250 per cent, the no-delivery period on BSE was from October 22 to November 5, 2001.

This means, that if the investor wants to avail this special dividend from the company, he has to purchase this stock latest by October 21 on the BSE.

On the NSE, the no-delivery period for Hero Honda starts on October 25 till November 6, which means any investor who purchases shares of Hero Honda from October 22 is not entitled for a 250-per cent interim dividend on the BSE, while on the NSE, he is entitled to get this dividend till October 24.

Infosys Technologies’ record date is on November 2, with no-delivery on BSE starting from October 18 and ending on October 31, while on the NSE the no-delivery is from October 22 to November 1.

For any trade transacted just before the no-delivery period begins, the settlement cycle (under rolling settlement) is stretched over 16-21 days (including the week for pay-in, plus the the no-delivery period).

Thus, the investor will have to wait for a maximum of 21 days for receiving his payment under rolling settlement system. These 21 days, however, are not identical/uniform on both these SEs.