Given below are two statements:
Assertion (A): Rolling settlement requires effective implementation of electronic fund transfer and dematerialisation of shares.
Reason (R): Rolling settlement implies fast movement of shares.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both (A) and (R) are true and (R) is the correct explanation of (A).
Assertion (A): Rolling settlement requires effective implementation of electronic fund transfer and dematerialisation of shares. — True. Since 2003, all shares are settled under rolling settlement on a T+2 basis. This needs electronic fund transfer and shares in demat form.
Reason (R): Rolling settlement implies fast movement of shares. — True. Under rolling settlement every trade is settled within 2 days of the trade date, so shares and money move fast.
Why R explains A?
Shares and cash must change hands within two days. Paper certificates and cheques cannot move that fast. So money has to move by electronic fund transfer, and shares have to be in demat form. The fast movement in R is the cause of the need in A.
NCERT (Pre-rationalised Edition): “Steps in the Trading and Settlement Procedure … A new system, i.e, rolling settlement, was introduced in 2000, so that whenever a trade took place it would be settled after some days. Since 2003, all shares have to be covered under the rolling settlement system on a T+2 basis, meaning thereby that transactions in securities are settled within 2 days after the trade date. Since rolling settlement implies fast movement of shares, it requires effective implementation of electronic fund transfer and dematerialisation of shares. …” |