16 March 2024 – In a bid to bolster market liquidity, the Securities and Exchange Board of India (SEBI) is set to roll out the beta version of T+0 settlement on an optional basis starting from March 28, 2024. This move marks a significant development in the Indian capital markets landscape.
SEBI’s decision
Announced during the 204th Board meeting held in Mumbai, entails launching a beta version of the optional T+0 settlement for a limited set of 25 scrips and with select brokers. The regulator will conduct further stakeholder consultations, including feedback from users of the beta version, to gauge its effectiveness and gather insights for potential enhancements.
The T+0 settlement cycle, allowing simultaneous settlement of funds and securities on the same day as the trade initiation, contrasts with the current T+1 settlement system. Over the years, SEBI has progressively reduced settlement periods, from T+5 to T+3 in 2002 and subsequently to T+2 in 2003. The introduction of T+1 settlement in 2021 was another step towards enhancing market efficiency.
The adoption of T+0 settlement as an alternative to T+1 is expected to address counterparty risk and boost market liquidity. SEBI Chief Madhabi Puri emphasized the aim of creating competitive regulated markets that offer investors comparable advantages to alternative investment avenues like cryptocurrencies available in other jurisdictions.
SEBI’s consultation paper highlighted the benefits of shorter settlement cycles, such as faster settlements, increased control over funds, and greater flexibility for shareholders. This initiative aligns with SEBI’s broader objectives of modernizing India’s financial markets and aligning them with global standards.
In conclusion
The introduction of T+0 settlement underscores SEBI’s commitment to fostering a dynamic and investor-friendly market ecosystem, paving the way for enhanced liquidity and efficiency in securities trading.
