In a move aimed at increasing liquidity in the market, the Capital markets regulator Securities and Exchange Board of India (SEBI) will launch the beta version of the T+0 settlement on an optional basis from March 28, 2024.
Announcing the introduction of the new and optional settlement cycle, SEBI said, “The Board approved the launch of a Beta version of optional T+0 settlement, for a limited set of 25 scrips, and with a limited set of brokers. In parallel, SEBI shall continue to do further stakeholder consultation, including with the users of the Beta version.”
The Board will review the progress at the end of three and six months from the date of implementation and determine further steps, SEBI said while considering the shareholder’s feedback. The decision was taken at the 204th Board meeting of SEBI which was held in Mumbai on Friday.
Understanding the relevance of T+0 settlement
T+0 settlement allows both funds and securities transactions to be settled on the same day when the trade is initiated.
At present, the Indian securities markets operate on a T+1 settlement cycle, where the settlement happens on the next day of trade.
In 2002, the regulator cut down the settlement period from T+5 to T+3, and in 2003, SEBI further reduced it to T+2. In 2021, the T+1 settlement started and was gradually implemented, with the final phase completed in January 2023.
Notably, the T+0 settlement cycle will now be offered as an alternative alongside T+1. Further, the adoption of shorter settlement cycles is expected to mitigate counterparty risk and enhance market liquidity.
Earlier last week, SEBI Chief Madhabi Puri said the instantaneous settlement is aimed at making regulated markets competitive and offering investors the same set of advantages as others. The reference was made to other alternative investment options like crypto available to investors in other countries. In the consultation paper issued on December 22, 2023, SEBI mentioned that the shorter settlement cycle will offer shareholders greater flexibility by facilitating faster settlements and empowering them with increased control over their funds.
https://www.financialexpress.com/market/sebi-introduces-t0-settlement-a-look-at-how-this-short-settlement-mode-will-impact-shareholders-3427057/
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