A look at how shareholders would be impacted by SEBI’s introduction of T+0 settlement

The Securities and Exchange Board of India (SEBI), the capital markets regulator, will provide the beta version of the T+0 settlement on an optional basis starting on March 28, 2024, to boost market liquidity.

SEBI announced the implementation of a new optional settlement cycle, saying, “The Board approved the launch of a beta version of optional T+0 settlement, for a limited set of brokers and a limited set of scrips.” The users of the beta version are among the stakeholders with whom SEBI will continue to interact in parallel.

After three and six months from the date of implementation, the Board will assess the results and decide on further measures, according to SEBI, taking into account the input from shareholders. The choice was made during Friday’s 204th SEBI Board meeting, which was held in Mumbai.

Understanding the significance of T+0 settlement:

T+0 settlement enables the settlement of securities and money transactions on the same day that the deal is started. The settlement process in the Indian securities exchanges now takes place on the next trading day, following a T+1 cycle.

The regulator shortened the settlement term from T+5 to T+3 in 2002, and SEBI further shortened it to T+2 in 2003. The T+1 settlement was initiated in 2021 and was implemented progressively, with the last step being finished in January 2023.

Interestingly, in addition to T+1, the T+0 settlement cycle will now be available as an option. Additionally, it is anticipated that shorter settlement cycles would improve market liquidity and reduce counterparty risk.

The shorter settlement cycle will provide shareholders more freedom by enabling quicker settlements and giving them more control over their money, according to SEBI’s consultation document published on December 22, 2023.

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