In yet another landmark development, the Securities and Exchange Board of India (SEBI) is poised to introduce the T+0 settlement in the equity cash segment on an optional basis from March 28, 2024. This move signifies that all trades will now be settled on the same day!
Let’s delve into this development in detail, examining its impact, and also examine recent developments introduced by SEBI.
What’s Happening?
India’s market regulator SEBI will introduce the T+0 settlement cycle from March 28, 2024, on an optional basis. This means that all trades will be settled on the same day, ensuring instant settlement of securities and funds. Currently, securities are settled on a T+1 (Trade plus one day) basi
According to SEBI Chairperson Madhuri Puri Buch, the rationale behind this move is to address the emergence of alternatives like cryptocurrencies. “We want to ensure our regulated market remains competitive and offers the same advantages to investors”, she stated. She further added that the instant settlement cycle would be fully implemented by March 2025.
How Will the Move be Implemented?
SEBI plans to implement the move in two phases:
a) In the first phase, a proposal for an optional T+0 settlement cycle for trades until 1:30 PM has been made, with the settlement of securities and funds completed by 4:30 PM the same day.
b) The second phase involves expanding the stocks under the instant settlement cycle. Here, an optional trade-by-trade settlement will be conducted for trades until 3:30 PM.
An API-based interface will be established between the depositories and clearing corporations to facilitate real-time intimation of early pay-in.
What Would be the Impact of Such a Move?
Analysts suggest that this move will free up margins and provide a liquidity boost in the market. However, it may negatively impact the business model of stockbrokers who heavily rely on interest income from client funds. Brokers’ float would decrease as a result. Nonetheless, investors would have greater control over their funds and securities.
A comparison between T+0 and T+1 Settlement Date
A Look at Recent Developments Introduced by SEBI
Over the years, SEBI has successfully shortened the trade settlement cycle. In 2002, the cycle was shortened from T+5 to T+3 days, and then further to T+2 in 2003.
Furthermore, in 2021, SEBI introduced the T+1 settlement cycle in a phased manner initially, which was fully implemented in January 2023.
Thus, this marks India’s journey from a T+5 to a T+1 settlement system over the years.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.
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