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In a recent announcement at the Global Economic Policy Forum in Delhi, Madhabi Puri Buch, Chairperson of the Securities and Exchange Board of India (SEBI), revealed the regulator’s plan to implement same-day settlement of trades on stock exchanges. This move, commonly known as T plus zero (T+0) settlement, aims to revolutionize the current settlement process.
Current Settlement Process
Currently, trades in India follow a “T+1” settlement cycle, meaning settlements occur one day after the trades are initiated. The shift to T+0 settlement would mean that trades are settled on the same day they are executed, providing instant settlement. This move follows the recent transition to T+1 settlement in January 2023, replacing the earlier T+2 system.
SEBI’s Timeline
Madhabi Puri Buch stated that SEBI aims to have the T+0 settlement norm in place by the end of the current financial year 2023-24. She emphasized SEBI’s goal for instantaneous settlement within 12 months from the implementation of T+0 settlement, setting a target for March-end 2024.
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This timeline highlights the regulator’s commitment to enhancing the efficiency of trade settlements in the Indian stock market.
Market Context
India is getting ready to join China as the second country with a one-day settlement cycle. In contrast, most major economies around the world follow a settlement cycle of two days. The move towards a shorter settlement cycle accelerates the process of transferring securities and funds between buyers and sellers.
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Impact on Investors
The shorter settlement cycle (T+0 Settlement) not only aligns with global trends but also benefits investors by providing faster access to securities and funds. The reduced settlement time enhances liquidity in the market and streamlines the overall trading process for market participants.
Final Words
SEBI’s initiative to implement same-day settlement reflects a progressive step towards aligning India’s stock market with international standards. The proposed timeline and focus on instant settlement underscore SEBI’s commitment to enhancing efficiency and accessibility for investors in the Indian financial landscape.
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Disclaimer:
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