‘T+0’ trade settlement in India to soon be a reality; all you need to know about it
India will be only the second country after China to be operating on a short settlement cycle.
Currently, trade settlement in most other major economies is completed within two days.
Last week, the Securities and Exchange Board of India said that the beta version of optional T+0 settlement will be launched for a limited set of 25 stocks, and with a limited set of brokers.
The market regulator will review the progress at the end of three months and six months, and decide on the further course of action.
“Such a transition is believed to offer numerous benefits, notably in the reduction of counterparty risk and the bolstering of market efficiency through the swift exchange of funds and securities between buyers and sellers,” said Rakeshh Mehta, chairman of Mehta Group — Mehta Equities.
Furthermore, it will also substantially lower operational expenses for market participants and reduce the funding costs that brokers face.
“T+0 settlement would help in freeing up brokers’ own funds within the system, thus, reducing overall cost of doing business,” said Shrey Jain, founder & CEO, SAS Online.
Currently, if a client sells shares, the amount is credited in the trading account instantaneously.
Client is free to trade with this capital or buy further delivery. On the exchange side, this fund gets credited to the broker only after settlement on T+1 basis.
However, with T+0 settlement, the funds would be received by the end of the day, thus, freeing up brokers’ capital involved in the business.
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