google-site-verification=dCpXFYL0M_Z835WKryUkqtFobns-FEoO78FXyXmp1Pk google-site-verification=dCpXFYL0M_Z835WKryUkqtFobns-FEoO78FXyXmp1Pk
 

Is T plus settlement possible in India?


There are many types of assets being traded in the stock market. When you make any trade, there are always two or more things involved, one being the money, of course, and the second being stocks, shares, bonds, gold, etc. As a trader, it is essential to learn how the trading works, what will be the duration of completion of your transactions, along with the tools and strategy.


T+ means the trade-related settlement cycle, that is, by what time your transaction will be cleared, and you will receive either your money or shares. Till 2003, this Settlement Cycle was of 3 days, known as T+3, which means the trade or transaction done today will reflect in your bank account or Demat account after 3 trading days.


Later, in 2003, the SEBI Securities and Exchange Board of India proposed reducing transaction time from T+3 to T+2 Settlement Cycle.


This reduction in the settlement cycle helped the money to be credited faster than usual, shares to reflect in your account faster, and increased the liquidity of many stocks. The transaction started at a regular rate, allowing more chance of fluctuations and thus profit (or loss). The funds started to rotate from one asset to another and from one company to another, providing the traders with a wide range for trading.


In February 2022, with the increased technological tools, having huge human resources such as Stock Brokers, depository participants, Stock Exchanges, and the corporations responsible for clearance, they could finish the task sooner than expected. So, SEBI is planning for a T+1 settlement cycle.


Now, many people have questions in their mind: Is T+0 possible in India? We shall in detail about whether it is possible or not further in this article.


We are not taking into consideration Intraday trading in the stock market. Apart from that, currently, the Indian stock market is following the T+2 Settlement Cycle. It means that whenever any transaction is done, it gets reflected after two trading days.


Suppose you have purchased some shares that will be visible in your Demat account after two days, or if you have sold the shares, the amount will be credited after two trading days and available for withdrawal.


Although the T+2 settlement cycle has been working completely fine in the Stock Market for years, the SEBI - Securities and Exchange Board of India published a notification in September 2021 to implement the T+1 Settlement cycle. According to the T+1 stock market, there have been provisions to implement the same in an orderly manner and will be done step by step.


The top 100 stocks listed on Stock Exchanges (BSE and NSE) will enjoy the benefits of T+1. From March 2022, the 500 companies listed at the bottom will have the benefits of T+1, while the other companies will start to get these benefits from October 2022.


Based on the T+1 cycle, whatever transaction is made will get reflected in one business day. These one-day settlements will have to work quickly and might see many changes.


Again, the question from Stock Brokers is, will the T+0 Settlement cycle be feasible in the Indian stock market? It is not easy to answer these questions. The reduction of one day in the settlement cycle from T+2 to T+1 has significantly impacted stock brokers, depository parties, stock exchanges, and the banks and corporations responsible for clearing.


The shift from T+2 to T+1 is testing their operating speed along with the efficiency, now speaking of T+0, which means the shares to be shown in the account on the same day of the transaction and the amount to be credited on the same day.


The above seems quite impossible for a few decades in India and will require much more resources than presently available. This is unlike the bank transfer, where only currency or money is used in the transaction. Here, money is traded against shares, stock, gold, and other underlying assets, including several Stock Brokers, agencies and middlemen, etc.


Conclusion


So, looking at the shift from T+2 to T+1, many Stock Brokers are still confused and are trying their best to adjust to the new settlement cycle. There was already no problem with T+2, but with the T+1 Settlement cycle, all the bodies involved have to work faster than before.


So, the T+0 Settlement cycle may not seem possible currently, but yes, with more advanced technologies and digital or virtual currency, it can be possible after a few years. We have to wait and see when it will be applicable.



25 views0 comments

Recent Posts

See All