The Union Minister
of Finance and Company Affairs, Shri Jaswant Singh today launched
the retail trading of Government securities on stock exchanges.
With this facility, retail and other investors will be able to
trade in Government securities in an anonymous, order driven,
screen based trading system of the stock exchanges. Since terminals
of the designated stock exchanges are available in over 350 cities,
this move will bring government securities to the doorsteps of
small investors. This would also allow investors to enjoy the
freedom of holding a security for a very short term and thus would
provide an alternative to the existing saving instruments, such
as, bank deposits of corresponding tenure. Keeping in view the
retail investors, the minimum order size shall be 10 units of
face value Rs.100 each and in multiples thereof. Further, this
would enable different entities, such as, rural and cooperative
banks, provident and pension funds across the country,! to participate
in the transactions in Government securities with ease, transparency
and safety.
To begin with, all
outstanding and newly issued central government securities would
be eligible for trading under the system. The treasury bills,
state government and other securities, which are eligible are
government securities, would be included in phases by the RBI
in consultation with SEBI. RBI will provide the exchanges and
the depositories, a list of outstanding government securities,
which could be traded on the permitted exchanges.
This facility will
be in addition to the present system of dealing in government
securities through the Negotiated Dealing System of the RBI. Besides
expanding the investor base and providing countrywide access to
the government securities market, this measure will also help
in reducing time and cost in trade execution by matching orders
on a strict price time priority. It is also expected to enhance
the operational and informational efficiency of the market as
well as its transparency, depth and liquidity and is expected
to reduce the cost of borrowings.
The equity trading
model would be adopted for trading of Government securities on
the permitted exchanges, so that there would be no requirement
for a fresh membership on the exchanges or on the clearing corporation/clearing
houses to trade on government securities. Like equities, the government
securities would be traded on the permitted exchanges by T + 3
rolling settlement. The settlement cycle would be further shortened
along with the shortening of the settlement cycle for equity trading.
The clearing corporation and clearing house would provide the
financial guarantee for settlement of obligations to its clearing
members, as they do for equity market.
