SEBI Proposes Optional T+0, Instantaneous Settlement The regulator plans to implement this in two phases, and to begin with eligible securities will be top 500 listed companies based on the market capitalisation.

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SEBI Chairperson Madhabi Puri Buch

The market regulator SEBI has sought comments and inputs from stakeholders and members of public on introduction of the facility for clearing and settlement of funds and securities on T+0 and instant settlement cycle (on optional basis) in addition to the existing T+1 settlement cycle in secondary markets for equity cash segment.

In a consultation paper, the regulator stated, "In today's age, reliability, low cost and high speed of transactions are key features that attract investors to particular asset classes. To that extent, reducing settlement time and hence increasing operational efficiency of dealing in Indian securities can further draw and retain investors into this asset class."

The comments are sought from public till January 12. The regulator plans to implement this in two phases. In Phase one, optional T+0 cycle will be implemented for trades taken till 1:30 pm. Then, settlement of funds and securities is to be completed by 4:30 pm. In Phase two, there will be an optional instantaneous trade-to-trade settlement for both funds and securities. In this, trading will be done till 3:30 pm.

After Phase two of optional instantaneous settlement is implemented, Phase one of optional T+0 will be discontinued, said the paper.

To begin with, eligible securities for T+0 settlement will be the top 500 listed companies based on the market capitalisation.

On concerns that this may increase cost of funding for clients, the regulator said that high percentage of retail investors bring upfront funds and securities before placing the order. For the period June 2023, for around 94 percent of delivery based trades with value up to Rs 1 lakh per transaction, investors made early pay–in of funds and securities. "Thus, this client base already has funds and securities made available before placement of order," the consultation paper noted.

In 2002, Sebi, shortened the settlement cycle to T+3 from T+5, and subsequently to T+2 in 2003. In 2021, T+1 settlement was introduced in a phased manner which was fully implemented from January 2023.

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