DIFFERENCES IN TRADING CYCLES AMONG STOCK EXCHANGES
Indian stock exchanges, now, most of them, have a weekly trading cycle but the cycles are not uniform. For example, NSE has from Wednesday to Tuesday and BSE has from Monday to Friday.
Due to difference in trading cycles, the brokers who have membership in both the exchanges can easily go on circulating their trades from one exchange to the other without ever having to delivery.
Such situation is a complete travesty of the cash market and an abuse to the stock market system.
It seems that in Indian stock markets, the different trading cycles have been kept with a vested interest in order to deliberately generate arbitrage opportunities.
It is seen that due to this, the prices for the same securities on two (NSE and BSE) stock exchanges differ from 0.5 to 1.5 percent even it is larger on expiration days.
The Committee feels that the different cycles serving the interest of only speculators and not of genuine investors. Even it is not good for market develop¬ment and futures trading.
It is also noted, that the prices of various securities on both exchanges (NSE and BSE), sometimes are not the same. As a result, the value of the stock indices on both the exchanges will not be same, if computed separately from the NSE and BSE prices. This will create a problem in valuation of future market stock.
The Committee also noted that for a successful future trading, a coordinated but pro-competitive nation wide market system be achieved.
So it is suggested that before implementing a uniform trading cycle system among all exchanges, till such time the rolling settlement system can be adopted. This system will provide a sound and reliable basis for futures trading in India.
Indian stock exchanges, now, most of them, have a weekly trading cycle but the cycles are not uniform. For example, NSE has from Wednesday to Tuesday and BSE has from Monday to Friday.
Due to difference in trading cycles, the brokers who have membership in both the exchanges can easily go on circulating their trades from one exchange to the other without ever having to delivery.
Such situation is a complete travesty of the cash market and an abuse to the stock market system.
It seems that in Indian stock markets, the different trading cycles have been kept with a vested interest in order to deliberately generate arbitrage opportunities.
It is seen that due to this, the prices for the same securities on two (NSE and BSE) stock exchanges differ from 0.5 to 1.5 percent even it is larger on expiration days.
The Committee feels that the different cycles serving the interest of only speculators and not of genuine investors. Even it is not good for market develop¬ment and futures trading.
It is also noted, that the prices of various securities on both exchanges (NSE and BSE), sometimes are not the same. As a result, the value of the stock indices on both the exchanges will not be same, if computed separately from the NSE and BSE prices. This will create a problem in valuation of future market stock.
The Committee also noted that for a successful future trading, a coordinated but pro-competitive nation wide market system be achieved.
So it is suggested that before implementing a uniform trading cycle system among all exchanges, till such time the rolling settlement system can be adopted. This system will provide a sound and reliable basis for futures trading in India.