Consultation Paper on “Introduction of optional T+0 and optional Instant Settlement of Trades in addition to T+1 Settlement Cycle in Indian Securities Markets”

[1]SEBI, on December 22, 2023, invited comments from stakeholders and the public on introducing the T+0 and optional instant settlement cycles, alongside the existing T+1 settlement cycle in the secondary equity cash segment.

Highlighting previous efforts to reduce settlement cycles from T+5 in 2002 to T+1 in 2021, SEBI emphasized the need to adapt to technological advancements and promote investor-friendly measures. The proposal aims to provide low-cost, high-speed alternatives, attracting more participants to the Indian Securities Market with shorter settlement cycles on T+0 and optional instant settlement.

SEBI outlined key features, including instant receipt of funds and securities, reduced settlement risks, and enhanced investor protection by allowing direct crediting into clients’ accounts. The initiative is expected to bring flexibility to payouts, improve market efficiency, and enhance overall risk management for Clearing Corporations, as trades are backed by upfront funds and securities. Concerns were raised about liquidity fragmentation, increased trading costs due to upfront fund and security requirements, and potential price divergences between T+0 or instant settlement cycles and the T+1 settlement cycle. SEBI addressed the liquidity fragmentation concern, suggesting that participants accessing both T+0 (or instant settlement) and T+1 markets could bridge price and liquidity gaps. SEBI welcomes feedback to refine the regulatory framework for settlement cycles in Indian securities markets.

[1] https://www.sebi.gov.in/reports-and-statistics/reports/dec-2023/consultation-paper-on-introduction-of-optional-t-0-and-optional-instant-settlement-of-trades-in-addition-to-t-1-settlement-cycle-in-indian-securities-markets-_80204.html