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:
- T+0 Settlement Details: In Phase 1, deals executed before 1:30 PM will be settled by 4:30 PM the same day.
- 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.
Source: https://www.livemint.com/market/stock-market-news/t0-settlement-kick-starts-today-what-does-it-mean-how-does-it-affect-you-11711594988012.html#:~:text=SEBI%20to%20review%20progress%20in%20three%20and%20six%20months%20for%20future%20actions.&text=Stock%20exchanges%20are%20set%20to,current%20T%2B1%20settlement%20cycle.