SEBI Pushes for Transparency and Risk Reduction with T+0 Settlement and ASBA Mechanism

The Securities and Exchange Board of India (SEBI) is working to lower the ₹4.5 trillion “float” held as collateral by brokers, custodians, and clearing corporations. Ananth Narayan, SEBI’s Whole-Time Member (WTM), stated that this initiative seeks to reduce risks and enhance transparency in the financial system.

Focus on Same-Day Settlements (T+0)

Narayan emphasised the move towards same-day (T+0) settlement, which ensures money remains within the regulated banking system. Leveraging UPI technology will further secure funds and streamline operations. Currently, T+0 settlements apply to the top 500 stocks, a significant expansion from the initial 25 scrips.

ASBA-Like Mechanism in Secondary Markets

SEBI is urging brokers to adopt an ASBA-like mechanism, which blocks funds in investors’ accounts rather than transferring them to brokers. This reduces the client float and promotes greater cost-efficiency and transparency. While optional, the regulator expects the adoption of T+0 and ASBA mechanisms to grow as initial resistance fades.

Tackling Inefficiencies and Hidden Costs

Narayan pointed out that large floats represent inefficiencies that enable brokers to earn non-transparent revenues. SEBI aims to replace this system with a clear and transparent fee structure that benefits both intermediaries and investors.

Financial Inclusion with Investor Awareness

SEBI’s financial inclusion initiatives focus not just on expanding the investor base but also on educating them about market risks. Narayan highlighted the need to bridge the gap between total PAN holders and active investors.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.