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The Securities and Exchange Board of India (Sebi) is to allow the two Mumbai stock exchanges to begin physical settlement in the derivatives markets, alongside the current cash settlement system.
While both exchanges have begun work on the new rule, market participants say there is still some way to go before physical settlement becomes a reality.
Speaking to the Times of India, a spokesman for NSE said: "We are examining the various options and will come back with our evaluation on Sebi's decision."
The current cash settlement system means that many stocks show high volatility during the days leading up to the expiry of contracts, but the new rules should reduce this. They should also lead to an increase in securities lending activity, an issue that Sebi has been focusing on in recent years.
