The introduction of Straight Through Processing is going to revolutionize the way the Indian capital market has been functioning. It will not only facilitate speedy processing but also help enhance depth and transparency. The Indian stock market is well poised to usher in a new era as the Straight Through Processing (STP) is going to be a reality soon. The electronic processing mechanism, which will allow the market participants to do away with paper work, is going to be implemented soon as decided by the Securities and Exchange Board of India (SEBI). According to the market regulator, market wide STP will be made mandatory for institutional investors from July 1, 2004.1 The new system would also mean shifting towards the shortest possible settlement cycle i.e., T+1 from the present T+2. Undeniably, this is going to be a major milestone in the annals of the Indian capital market as even the developed markets like the US are yet to implement the T+1 cycle.

Straight Through Processing represents a major shift towards same day settlement in securities by removing redundant operations and utilizing electronic transfers.2 In this mechanism, all the data or information related to buying and selling of securities are recorded and transferred electronically, right from the point of first deal to final settlement of cash and securities. What it effectively means is this system will allow all the related partiesinvestor, broker, and custodian to get hooked together and facilitate faster and error-free flow of information from one end to the other in a seamless manner. Further, it would result in reduced settlement cycle, transparency and superior audit trails, reduced counterparty and operational risk etc. If we compare this with the present situation, today's system involves costly multiple data re-entry, from paper documents and other sources that are susceptible to errors, discrepancies, delays and possible fraud.

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