Sebi Proposes Same-Day Settlement (T+0) and Instant Settlement

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The Securities and Exchange Board of India (Sebi) has recently unveiled a consultation paper, outlining a groundbreaking proposal to introduce same-day settlement (T+0) and instant settlement on an optional basis in the Indian stock market. This move signifies a significant shift in the settlement cycle and aims to enhance market efficiency and liquidity. In this article, we explore the key aspects of Sebi’s proposal and its potential impact on the Indian capital market.

Sebi’s proposed changes will be implemented in two phases. The first phase will witness the introduction of T+0 settlement, allowing for same-day settlement in addition to the existing T+1 cycle. This means that investors and market participants will have the option to choose between the traditional one-day settlement and the expedited same-day settlement for their transactions.

To kickstart this transformative initiative, Sebi plans to make T+0 settlement available initially for the top 500 listed companies based on market capitalization. This strategic approach ensures a gradual and controlled implementation, focusing on major players in the market before potentially expanding the scope to include more securities.

About Sebi:

Sebi has opened the floor for public comments on this proposed change, encouraging stakeholders and market participants to share their perspectives on the potential impact of same-day settlement. This inclusive approach aligns with Sebi’s commitment to transparency and collaboration in shaping market regulations.

The move towards same-day settlement aligns with global trends in financial markets, where efforts are continually made to reduce settlement times for increased efficiency. Sebi aims to mitigate counterparty risks, reduce market volatility, and enhance liquidity by introducing these shorter settlement cycles. Investors stand to benefit from quicker access to funds and a potentially more responsive market environment.

While the proposal brings exciting prospects for the Indian stock market, it also raises considerations and challenges. Market participants must adapt their operational processes to accommodate the shorter settlement cycles, and robust risk management systems will be crucial to navigate potential uncertainties. Additionally, the optional nature of the same-day settlement allows market players to choose the settlement cycle that best suits their strategies and risk appetite.

Sebi’s proposal to implement same-day settlement and instant settlement on an optional basis reflects a forward-looking approach to enhance the efficiency and resilience of the Indian stock market. As the consultation period unfolds and stakeholders provide their insights, the market awaits the potential transformation that could redefine the dynamics of stock trading in India. The move towards shorter settlement cycles marks a progressive step in aligning the Indian market with global best practices, fostering a more agile and responsive financial ecosystem.