Indian capital markets have undergone many changes during the last decade. With changes happening in quick succession SEBI has been putting all its efforts to increase the efficiency and transparency of the markets. The exponential growth in trading volumes and increased settlement risks have pushed the need for Straight Through Processing making it a pre-requisite for the smooth functioning of the markets.

The current STP scenario in India is that of T+2. It is a vision for India to achieve STP T+1. The Securities and Exchange Board of India (SEBI) had endeavored to shorten the settlement cycle and has been successful in reducing the same from T+5 to T+2. The target to be achieved now is T+1. In order to achieve this, Sebi set up a STP Committee and defined a roadmap for an efficient STP framework in February 2002 with a vision to make the Indian capital markets at par with global practices.

STP, as a market order, was a new concept in India, but it has grown rapidly over the years. Since December 2002, when STP services were formally launched, several market participants have adopted the STP framework in their operations and are also enjoying the benefits of shorter settlement cycles.

The Information Technology Act, 2000, does recognize Electronic Communication Networks (ECNs) and digital signatures. For this purpose, digital certifying authorities have been identified who are legally allowed to provide digital signatures to the Indian participants. The contract note information has to be electronically transferred from the broker to the investor/sub-custodian and the mutual fund/FII in a secure and standard form along with the necessary authorization.

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