Sebi issues paper on instant settlement of trades, seeks views
- The SEBI recently proposed a shift towards a same-day settlement cycle (T+0) in two phases as an initial step towards instantaneous settlement in the equity cash segment.
The Phases
- Phase 1
- In the first phase, SEBI envisions an optional T+0 settlement cycle for trades until 1:30 pm.
- Settlement of funds and securities would be completed on the same day by 4:30 pm.
- Phase 2
- The second phase proposes an optional immediate trade-by-trade settlement (funds and securities), with trading extending until 3:30 pm.
Scope and Implementation
- SEBI had previously shortened settlement cycles to T+3 in 2002, T+2 in 2003, and introduced T+1 settlement in 2021, fully implemented from January 2023.
- To initiate T+0 settlement, SEBI suggests making it available initially for the top 500 listed equity shares in three tranches based on market capitalization.
- The exchanges shall coordinate to publish a common list of securities and calendar for migration under T+0 settlement.
Surveillance Measures
- Surveillance measures applicable to T+1 settlement cycles would extend to T+0.
- Securities under trade-for-trade settlement and those trading in periodic call auction sessions would not be eligible for T+0.
- It is observed that a high percentage of retail investors bring upfront funds and securities before placing the order, emphasizing the readiness for an instant settlement mechanism.
Significance
- Implementing T+0 settlement aims to provide instant receipt of funds and securities, reducing the risk of settlement shortages.
- It strengthens investor protection, enhances control over securities and funds, and reduces risk exposure for Clearing Corporations.
Prelims Takeaway
- Securities and Exchange Board of India (SEBI)
- T+0 settlement