Advantages of Rolling Settlement

The rolling settlement has many advantages. One, it reduces speculation and arbitrage in scrips as settlement occurs on a daily basis. Thus, there would be increase in delivery-based transactions reducing the speculation currently existing by way of carry forward of position in various scrips. Apart from this, shifting position from one stock exchange to another will reduce which, in turn will eliminate arbitrage opportunities in scrips. Two, it reduces pricing glitches and manipulation and explores a better price discovery process. With the rolling settlement in place, all open positions at the end of each day would come up for delivery thereby improving the quality of cash market transactions. Thus, price formation process on daily basis would be improved thereby resulting in improved price discovery process. Three, it reduces end of settlement period pressure as shares are delivered and cash is paid everyday instead of a week. Thus, the rolling settlement spreads the delivery and payment throughout the week. Four, it narrows the bid-ask spreads, reduces the settlement risk and eliminates the need to synchronize the settlement dates on NSE and BSE or for that matter across the exchange. And, of course, with the implementation of a rolling settlement system, investors will be benefited, as settlement will not take long and the prices an investor pays or receives will be closer to the market price. Securities and money will be transmutable.