SEBI introduces optional same-day settlement for select stocks
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The Securities and Exchange Board of India (Sebi), the country's market regulator, has announced the launch of an optional same-day (T+0) settlement cycle for a select group of 25 stocks starting March 28, as per a circular published on its website last Thursday. This new initiative, referred to as the beta version, is set to coexist with the traditional next-day (T+1) settlement cycle, where trades are settled within 24 hours of execution.
The T+0 settlement option will be available for trades executed between 9:15am and 1:30pm IST.
The list of eligible stocks and participating brokers, who comply with the exchanges' processes and risk management standards, will be disclosed on the exchanges' websites. However, Sebi has not specified the date by when this information will be made available.
Sebi outlined that the T+0 cycle would operate within a 100 basis point price band above or below the T+1 market prices to prevent market distortions. "This band will be re-calibrated after every 50 basis points movement in the underlying T+1 market," said Sebi in the circular.
Notably, prices from the T+0 market will not influence the calculation of indexes or the settlement price of shares. Additionally, Sebi mandated exchanges to submit a fortnightly report on the T+0 settlement cycle's beta version until further instructions are given.
The move towards a same-day settlement framework reflects Sebi's commitment to enhance cost and time efficiency, transparency, and risk management within the securities market ecosystem. The regulator has progressively shortened the settlement cycle from T+5 to T+2 and now introduces T+0 to keep pace with evolving market dynamics and safeguard investor interests.
Market Infrastructure Institutions (MIIs) will issue additional operational guidelines, including mechanisms for trading, clearing, and settlement, as well as Frequently Asked Questions (FAQs) regarding the new settlement cycle. These details, alongside the list of the 25 selected stocks, will be disseminated on their respective websites to ensure a smooth transition to the updated framework.
The T+0 settlement option will be available for trades executed between 9:15am and 1:30pm IST.
The list of eligible stocks and participating brokers, who comply with the exchanges' processes and risk management standards, will be disclosed on the exchanges' websites. However, Sebi has not specified the date by when this information will be made available.
Sebi outlined that the T+0 cycle would operate within a 100 basis point price band above or below the T+1 market prices to prevent market distortions. "This band will be re-calibrated after every 50 basis points movement in the underlying T+1 market," said Sebi in the circular.
Notably, prices from the T+0 market will not influence the calculation of indexes or the settlement price of shares. Additionally, Sebi mandated exchanges to submit a fortnightly report on the T+0 settlement cycle's beta version until further instructions are given.
The move towards a same-day settlement framework reflects Sebi's commitment to enhance cost and time efficiency, transparency, and risk management within the securities market ecosystem. The regulator has progressively shortened the settlement cycle from T+5 to T+2 and now introduces T+0 to keep pace with evolving market dynamics and safeguard investor interests.
Market Infrastructure Institutions (MIIs) will issue additional operational guidelines, including mechanisms for trading, clearing, and settlement, as well as Frequently Asked Questions (FAQs) regarding the new settlement cycle. These details, alongside the list of the 25 selected stocks, will be disseminated on their respective websites to ensure a smooth transition to the updated framework.
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