SEBI to roll out T+0 Settlement Cycle in Indian stock market by March 28

In an innovative stride towards modernizing the Indian stock market, the Securities and Exchange Board of India (SEBI) has announced the initiation of the T+0 settlement cycle. Scheduled to begin on an optional basis by March 28, this move was revealed by SEBI Chairperson Madhabi Puri Buch during an event organized by the Association of Mutual Funds in India (AMFI) on March 11. This initiative is part of SEBI's broader objective to transition towards a same-day settlement norm by March 2024, eventually leading to an instantaneous settlement system within the following year.

The Evolution of Trade Settlement Cycles in India

The shift to a T+0 settlement cycle marks a significant leap from the current T+1 system, where transactions are settled one day post-trade. The settlement cycle in the Indian stock market was shortened from T+5 to T+3 in 2002 and then further to T+2 in 2003. In 2021, SEBI introduced the T+1 settlement cycle in a phased manner, which was fully implemented from January 2023.

The introduction of same-day settlements is aimed at expediting the exchange of securities and funds, providing a competitive edge in response to the growing interest in alternatives like cryptocurrencies. India is poised to become the second country, after China, to adopt such an expedited settlement cycle, setting it apart from the traditional two-day settlement period prevalent in other major markets.

Implementing T+0 Settlement in Phases

SEBI intends to introduce the T+0 settlement cycle in phases to facilitate a seamless transition. The initial phase introduces an optional T+0 cycle for trades executed up to 1:30 pm, with settlement of both funds and securities to be finalized by 4:30 pm. 

The second phase will offer an optional immediate settlement of trades, applicable to both funds and securities, with trading available until 3:30 pm. Upon the implementation of the second phase of instant settlement, the first phase's optional T+0 will cease.

Eligibility and Rollout Strategy

The rollout will initially cater to the top 500 listed companies based on market capitalization, divided into three batches for a gradual implementation. Initially, T+0 settlement eligibility will apply to these top 500 companies, which will be moved to the new settlement process in batches of 200, 200, and 100, starting with those having the lowest market cap to the highest.

This strategic approach aims to facilitate an efficient transition to the new settlement cycle, enhancing the market's overall efficiency and competitiveness.

By embracing faster settlement times, SEBI is setting a new standard for securities trading in India, offering investors the benefits of increased liquidity and agility in their investment activities.

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