The Securities and Exchange Board of India (SEBI) unveiled plans on March 21 to implement a beta version of same-day settlement, known as T+0, alongside the existing T+1 settlement cycle. This move, introduced on an optional basis, aims to enhance efficiency and flexibility in the equity cash segment.

Initially, the T+0 settlement option will be accessible for 25 selected stocks and through a limited group of brokers. Trading within this segment will be permitted between 9:15 am and 1:30 pm.

In a circular issued following the board’s deliberations and approval on March 15, SEBI outlined the rationale behind the decision. The regulator cited advancements in technology, market infrastructure, and the digitalization of India’s depository ecosystem as key enablers for the introduction of the T+0 settlement cycle.

The circular emphasized the potential benefits of a shortened settlement cycle, including cost and time efficiency, transparent fee structures for investors, and bolstered risk management across clearing corporations and the broader securities market ecosystem.

SEBI’s initiative aligns with global trends, as similar settlement cycles are already operational in select international markets such as Russia, South Korea, Taiwan, and Hong Kong, albeit for specific securities.

The introduction of the beta version of T+0 settlement marks a significant milestone in India’s financial landscape, signaling a concerted effort towards modernization and aligning with global best practices in securities trading and settlement.

How will this function?

The circular provided operational guidelines as outlined below:

Eligible Investors: All investors meeting the prescribed timelines, processes, and risk requirements set by the MIIs are eligible to participate in the T+0 settlement cycle segment.

Surveillance Measures: The surveillance measures applicable in the T+1 settlement cycle will also apply to scrips in the T+0 settlement cycle.

Trade Timings: Trading will occur in one continuous session from 09:15 AM to 1:30 PM.

Price Band: In the T+0 segment, prices will operate within a price band of +100 basis points from the prices in the regular T+1 market. This band will be adjusted after every 50 basis points movement in the underlying T+1 market.

Index Calculation and Settlement Price Computation: T+0 prices will not factor into index calculation and settlement price computation. There will be no separate closing price for securities based on trading in the T+0 segment.

Netting of Obligations: There will be no netting of pay-in and pay-out obligations between the T+1 and T+0 settlement cycles.