T + 0 Settlement System starts today

Starting today, India’s stock market will use a ‘beta version’ of the T+0 settlement system (same-day settlement). This is the world’s most rapid stock settling mechanism.

About the T+0 Settlement Cycle

SEBI plans to introduce the shortened cycle in two phases:

  1. T+0 Settlement Details: In Phase 1, deals executed before 1:30 PM will be settled by 4:30 PM the same day.
  2. Instant settlement mechanics: Phase 2 calls for immediate trade-by-trade settlement, with trading continuing until 3:30 PM.

Features of the T+0 Settlement Mechanism:

  • Early Pay-In Trends: A high percentage of retail investors are already making early fund and security deposits, indicating that they are ready for quick settlement.
  • Instant Receipt Advantages: The technique allows for immediate receipt of payments and securities, decreasing settlement shortages and increasing investor control.
  • Investor Protection: Directly crediting funds and securities into investors’ accounts, particularly for UPI clients, improves investor protection.

Scope and Implementation of T+0

  • Initially, the T+0 settlement will be accessible for the top 500 listed equity shares based on market capitalization, with three tranches.
  • The T+0 cycle will follow the same surveillance techniques as the T+1 cycle.
  • Trade-for-trade settlement securities will not be eligible for T+0. 

The rationale behind the T+O Cycle 

  • Focuses on market growth and efficiency. With a huge increase in market volumes and participants, SEBI intends to improve market efficiency and safety, particularly among retail investors.
  • Technological Advances: The advancement of payment technologies such as UPI, as well as the sophistication of market infrastructure, support quicker settlement timelines.
  • Investor Attraction: Faster transactions, dependability, and low prices are major elements that attract investors, making Indian equities an increasingly appealing asset class.

Benefits of the New Mechanism:

  • Flexibility for clients: The new system allows for speedier disbursements of monies to sellers and securities to purchasers, resulting in increased flexibility and control.
  • Market Ecosystem Advantages: The shorter settlement cycle is projected to improve operating efficiency in the securities market, benefiting the entire ecosystem.

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