India aims for instant stock settlement in global race for speed
The Securities and Exchange Board of India is proposing to start same-day settlement from March, before moving to a real-time process in 2025. The shorter cycles will be optional for investors and run alongside the existing system where trades are settled in one day, or T+1 in industry parlance.
Global appetite for quicker resolution has grown after a spike in prices of ‘meme stocks’ in 2021 left brokers like Robinhood Markets Inc.
struggling to post collateral for those trades during the two days it took to settle them. For the Sebi, faster settlement is also a magnet to lure retail investors who are shunning direct bets on stocks in favor of equity derivatives.
“If India’s market has to go from $4 trillion to $40 trillion, we need to constantly keep evolving and using new-age technology and next practices to strengthen our market,” said Sunil Sanghai, founder of NovaaOne Capital and a senior former banker at Indian units of HSBC Holdings Plc and Goldman Sachs Group Inc.
“Our market has embraced many changes in the past, no matter how big.”
India’s $4.3 trillion market moved to what’s known as T+2 back in 2003 — 14 years before the US — and became the second country after China last year to adopt T+1 approach, a regime the US will roll out this May.
“In today’s age, reliability, low cost and high speed of transactions are key features that attract investors,” Sebi said in the consultation paper while inviting comments on its plan until Jan. 12.
