Sebi chairman D R Mehta stressed the need for establishing early interconnectivity between the two depositories due to competition and for speedier expansion of the depository infrastructure in the country. Further, it was stressed that while on the one hand the depositories should be adequately compensated for the services they rendered, on the other, the interest of the investors should be paramount. It was recognised that issues relating to interconnectivity and the charges for transfer between depositories should be determined keeping inview these basic factors.

The committee would also examine the exit fee imposed by NSDL and come out with its suggestions within three months and till such time the charges for inter-depository transfer are not approved by SEBI, the charges would be deferred. If in the opinion of the committee, some charges are to be levied for any inter-depository transfer, this would be paid by the depositories. The two depositories have been asked to follow the settlement model earlier agreed by them, which envisages that settlement of market transactions would be started by asking the clearing house or corporation effecting the same pay-out of shares of each depository as a pay-in of shares in that depository.

However, CDSL would later be free to adopt the alternate mode suggested by BSE's clearing house which envisages on-market inter-depository settlement based on the instructions of clearing house to the depositories and subsequent transmission of information to the registrar and share transfer agent. Bombay StockExchange (BSE) president Anand Rathi said CDSL would commence participation with the clearing house from the next settlement beginning on July 12.

Sebi pointed out that the two depositories would, for now, follow the settlement model earlier agreed upon by them. This model envisages that settlement of market transactions will be started by asking the clearing members to open accounts in both depositories and the clearing house or corporation effecting the same pay-out of shares of each depository as a pay-in of shares in that depository.

Sebi has further decided that later CDSL would be free to adopt the alternate mode suggested by BSE's clearing house which envisages on-market inter-depository settlement based on the instructions of the clearing house or clearing corporation to the depositories, and subsequent transmission of information to the registrar and share transfer agent. This might call for some changes in the software of NSDL as well. The software experts of the two depositories would work outthe details of the changes to be made and determine the implementation within three months.

The Sebi release states that the inter-depository transfer is essential for the smooth functioning of the market and charges, if any, levied by a depository for such transactions, would have to take into account the interest of the investors. The committee deciding on charges for inter-depository transfers will submit the report to Sebi in three months and the charges for inter-depository transfer are recommended by the Committee and approved by Sebi.