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- Context (IE): SEBI has proposed the introduction of a facility for clearing and settlement of funds and securities on T+0 (same day) and instant settlement cycle on an optional basis.
- At present, the settlement of funds and securities happens on the T+1 cycle introduced in 2021 and implemented in January 2023. Under it, securities and funds are settled by the next day of the trade.
- The United States, United Kingdom, and Eurozone markets have not moved even to the T+1 system.
- SEBI has now proposed to implement a shorter cycle of settlement in two phases:
- Phase 1– T+0 Settlement Cycle: In it, an optional T+0 settlement cycle is envisaged, with the settlement of funds and securities to be completed on the same day by 4:30 PM.
- Phase 2– Instant Settlement Cycle: In it, an optional immediate trade-by-trade settlement (funds and securities) may be carried out. Here, trading will be carried out till 3.30 pm.
- Initially, T+0 settlement shall be made available in the top 500 listed equity shares based on the market capitalisation.
- Share delivery: In the T+0 cycle, the transaction will be delivered on the same day.
- A shorter cycle results in the reliability, low cost, and high speed of transactions.
- Faster fund remittances can occur by reduced capital requirement and increased capital liquidity.
- Reduced unsettled trades: Decreases the unsettled exposure to Clearing Corporation.
- Immunity to business shocks: The impact of counterparty insolvency/ bankruptcy on settling trade will be reduced.