SEBI’s Move Towards T+0 Settlement Cycle And Instant Settlements

In a bid to enhance market efficiency and competitiveness, the Securities and Exchange Board of India (SEBI) has announced plans to introduce the T+0 (same day) trade cycle settlement on an optional basis by March 28. This move comes as a response to the increasing popularity of alternatives like cryptocurrency and aims to provide investors with faster and more efficient settlement options.

The Transition to T+0 Settlement

SEBI Chairperson Madhabi Puri Buch made the announcement during an event in Mumbai, where she also revealed plans for an instant settlement cycle to be implemented by March 2025. The shift to T+0 settlement would mean that trades are settled on the same day, while instant settlement would ensure immediate settlement of trades.

Advantages of T+0 and Instant Settlement

The move to T+0 and instant settlement cycles is expected to bring several advantages to investors. These include instant receipt of funds and securities, elimination of the risk of settlement shortages, and greater control over funds and securities. Additionally, the new cycles are aimed at making the regulated market more competitive and offering the same advantages to investors as other alternative investment options.

Evolution of Settlement Cycles

SEBI’s decision to move towards faster settlement cycles is part of a broader trend towards shorter settlement cycles in the Indian market. The settlement cycle was first shortened from T+5 to T+3 in 2002 and then to T+2 in 2003. The introduction of T+1 settlement in 2021 marked another step towards faster and more efficient settlement processes.

SEBI’s Focus on SME IPOs

In addition to the changes in settlement cycles, SEBI Chairperson Madhabi Puri Buch also highlighted the regulator’s focus on the SME segment. Buch noted that SEBI has observed signs of manipulation in the SME segment and is working to address these issues. The regulator is looking to implement disclosures as a starting step to ensure transparency and fairness in SME IPOs.

Conclusion

SEBI’s decision to introduce T+0 and instant settlement cycles reflects its commitment to enhancing market efficiency and competitiveness. By providing investors with faster and more efficient settlement options, SEBI aims to ensure that the regulated market remains attractive and offers the same advantages as other investment options.

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.