Context (IE): SEBIhas 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.
Benefits
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.