NSE Begins Electronic Settlement of Unlisted Shares
The National Stock Exchange of India (NSE) has started electronic settlement of its unlisted shares, supplanting the earlier manual system. The change, effective from Monday, is intended to make the transfer of unlisted shares more streamlined through Central Depository Services India Ltd (CDSL), allowing for quicker and more efficient transactions.
In spite of the transition to electronic settlement, NSE made it clear that its shares will not be listed, i.e., they will not be traded publicly. This is done to abide by the rules of the Securities and Exchange Board of India (SEBI) under the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018.
Unlisted shares are privately owned equity in firms that are not listed. These comprise shares of startups, early-stage companies, and big ones such as NSE that are still not listed. The settlement process for these shares involved prior clearances from NSE and SEBI earlier, which resulted in up to four to five months of delay. The new system is likely to reduce it to a few days, which could spurt trading in the grey market.
Under the new system, the shareholders are able to transfer unlisted NSE shares on the use of a delivery instruction slip (DIS) through CDSL. Activation of NSE's international securities identification number (ISIN) on March 24 has made electronic transfer possible, doing away with manual applications. Earlier, the two-stage share transfer method has been suspended.
The move comes after SEBI directed last year to create a structured system for the trading of unlisted shares. Increasing interest in NSE's unlisted shares, particularly after BSE Limited's share jumped almost 5,000 percent in five years, is likely to propel increased activity in this segment.
