SEBI defers proposed full launch of same-day settlement, to start with Beta version

Mumbai: Taking into account stakeholder feedback, the Board of India’s capital market regulator Securities and Exchange Board of India (SEBI) approved the launch of a Beta version of optional T+0 settlement, for a limited set of 25 shares, and that too with a limited set of brokers.

The decision was taken at its Board meeting held on Friday. The T+0 system means that the settlements must be done within the same day, of the completion of a transaction.

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Those 25 shares that would be part of the Beta version have not been named yet by the regulator. Parallelly, the regulator SEBI said it shall continue to do further stakeholder consultation, including with the users of the Beta version.

The Board of the SEBI will review the progress at the end of three months and six months from the date of this implementation, and decide on further course of action, SEBI said in a statement.

SEBI, in its endeavour to keep pace with the changing times and carry out its mandate of development of securities markets and investor protection, shortened the settlement cycle to T+3 from T+5in 2002 and subsequently to T+2 in 2003.

Further in 2021, T+1 settlement was introduced in a phased manner which was fully implemented from January 2023. It was of the view that the significant evolution of payment systems in the country in recent years coupled with sophisticated and robust technologies used by market infrastructure Institutions (MIIs) appears to present further opportunities for advancing the clearing and settlement timelines, on an optional basis.
Against that backdrop, SEBI in December 2023 floated two propositions before the public and sought their suggestions.

The proposal to be implemented in two phases were: In Phase 1, an optional T+0 settlement cycle (for trades till 1:30 PM) is envisaged, with the settlement of funds and securities to be completed on the same day by 4:30 PM.

In Phase 2, an optional immediate trade-by-trade settlement (funds and securities) may be carried out. In the second phase, trading was to be carried out till 3.30 pm

After the implementation of phase 2 (optional instant settlement), the mechanism of optional T+0 settlement implemented under phase 1 was to be discontinued.

Besides, SEBI Chairperson Madhabi Puri Buch last year said the financial markets regulator was working on a mechanism for instant settlements of transactions on the stock exchanges.

She had said they were working on a mechanism for instant settlements and were engaged with the ecosystem.
“We believe that in the not very far future we will have a mechanism which will facilitate instantaneous settlement of transactions on the stock exchanges. That’s where we are headed,” she had said in July 2023.

The instantaneous settlement, once it is implemented, will put money into the hands of the investors on a real-time basis.
Over the last few years, Indian securities markets have seen tremendous growth, both in terms of volumes, and value, as well as the number of participants. This increase in participation of new investors in securities market puts greater onus on SEBI to make markets more efficient and safer for its participants, with a special focus on retail participants.