SEBI Introduces Optional T+0 Settlement for Top-500 Stocks
Moneylife Digital Team 11 December 2024
Market regulator Securities and Exchange Board of India (SEBI) has announced a significant shift in market operations by introducing an optional same-day or trading+0 (T+0) settlement cycle for the top-500 stocks by market capitalisation. This initiative, aimed at improving market efficiency and liquidity, will be implemented gradually, starting 31 December 2024.
 
According to SEBI’s circular, the transition will begin with the bottom-100 companies out of the top-500 stocks. Each month, another batch of 100 companies will be added until the entire group of 500 stocks is available for trading under the optional T+0 settlement cycle.
 
Stockbrokers will be allowed to participate in the T+0 cycle and charge different brokerage fees for T+0 and T+1 settlement cycles, as long as these fees comply with regulatory limits.
 
Initially, the T+0 mechanism will be limited to non-custodian clients, as SEBI focuses on ensuring smooth execution. Once exchanges, clearing corporations, custodians and depositories establish the necessary systems, institutional investors will be included later.
 
T+0 means trades would be settled immediately on the same day. It has advantages like instant receipt of funds and securities to an investor. Further, it will eliminate the risk of settlement shortage and give investors greater control over funds and securities.
 
In 2002, the settlement cycle was shortened to T+3 from T+5 and T+2 the next year. T+1 settlement was introduced in a phased manner in 2021.
 
In July last year, while announcing moving to a T+1 settlement cycle from the existing T+2 for all scrips from 1 October 2023, the market regulator said it was working on instant settlements of transactions in stock markets and, according to SEBI chairperson, the 'day was not far off'.
 
Key deadlines for the transition include 1 May 2024, when qualified stockbrokers (QSBs) and custodians must enable systems supporting the T+0 cycle. By 31 December 2024, the top-500 stocks by market-capitalisation will become eligible for the T+0 cycle, and by 31 January 2025, provisions for eligible scrips under the T+0 framework will take effect, SEBI says.
 
To facilitate the T+0 settlement, a separate block deal window will operate from 8:45am to 9am, complementing the existing T+1 block deal windows. Trades executed during this time will be settled the same day.
 
Under the T+0 settlement cycle, trades are settled on the same day, meaning shares are transferred to the buyer and funds are credited to the seller on the trade date itself. This faster settlement mechanism enhances liquidity and reduces counterparty risk.
 
The National Stock Exchange (NSE) first introduced the beta version of the T+0 rolling settlement cycle on 28 March 2024 as an alternative to the existing T+1 cycle. 
 
Following positive feedback, SEBI approved the inclusion of the top-500 companies, marking a major milestone in India’s market infrastructure development. This phased approach ensures market participants have adequate time to adapt, while SEBI continues its mission to foster efficiency and investor confidence in the Indian capital markets.
 
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