Leaders Online: The Securities and Exchange Board of India (SEBI) will introduce the T+0 trade settlement system on an optional basis by March 28, Sebi chairperson Madhabi Puri Buch said on Monday. He gave this information during the AMFI event.
Currently, the Indian stock market trades on a T+1 settlement cycle. T+0 means same day settlement and instant settlement ensures that transactions are settled immediately. That is, as soon as the shares are sold, the money will be deposited in the account immediately. (Stock Market T+0 Settlement)
SEBI had proposed to implement same-day settlement (T+0) in two phases. SEBI had also called for public suggestions on this. This will be a short settlement cycle in addition to the current T+1 cycle. Investors will benefit more after this new rule. When they buy the shares, the money will be transferred to the demat account on the same day. Also, after selling the shares, the money will be deposited in the account on the same day or immediately.
In the first phase an alternative T+0 settlement cycle (up to 1:30 PM) is expected to be completed by 4:30 PM on the same day with settlement of funds and securities.
In the second phase, an optional instant trade-by-trade settlement (funds and securities) can be done for all trades done up to 3.30 pm. That is, this option will be for all transactions done till 3.30 pm.
How will investors benefit?
The Sebi chief had said that in the first phase the alternative T+0 settlement would be implemented by the end of the current financial year. One of the major benefits of implementing an instant settlement system is to increase liquidity in the market. It will also strengthen investor protection as funds will be deposited directly into customer accounts.
The settlement cycle was brought down from T+5 to T+3 in 2002 and then to T+2 in 2003. Further in 2021 T+1 settlement was introduced in a phased manner. Which was fully implemented from January 2023.
According to Sebi's consultation paper, T+0 settlement system will initially be made available to top 500 listed companies based on market capitalization. This will be done in three phases of 200, 200, 100 from lowest to highest market capitalization. (Stock Market T+0 Settlement)
Meanwhile, India will become the second country after China to operate on a one-day short settlement cycle. Trade settlement in other major economies is usually completed within two days.
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