Stock market regulator Securities and Exchange Board of India (Sebi) has decided to abolish the no-delivery period for all types of corporate actions in respect of scrips, which are traded in the compulsory dematerialised mode.
The move follows a recommendation made by the secondary market advisory committee (SMAC) of Sebi at its meeting held on June 30, 2009.
According to market experts, the abolition of no-delivery period will help in curbing excessive speculation on shares during the period.
The circular will come into effect from August 1, 2009 and will apply to all corporate actions for which the record date or book closure falls on or after August 10, 2009.
A record date is the date established by an issuer of a security for the purpose of determining the holders who are entitled to receive a dividend or distribution. A particular scrip is placed under the no-delivery period just before the record date set by the company for any corporate action like bonus issue or dividend declaration to identify the actual beneficial owner of the shares as the settlement takes place on T+2 basis (two working days after the trade execution).
The Sebi circular states, ?It is decided to abolish the no-delivery period for all types of corporate action in respect of scrips, which are traded in the compulsory dematerialised mode and accordingly short deliveries if any of the shares traded on cum basis may be directly closed out?.
?Since a trader doesn?t have to either take delivery or give delivery of shares during the no-delivery period, it often leads to some amount of speculation in the scrips. The move to abolish no-delivery period would definitely help in reducing the volatility in the share prices,? said Arun Kejriwal, MD – Kejriwal Research and Investment Services Pvt Ltd.