The Securities and Exchange Board of India (SEBI) is poised to revolutionize the Indian stock market with the introduction of an optional T+0 settlement cycle starting March 28, as announced by SEBI Chairperson Madhabi Puri Buch. This move is set to enable same-day trade settlements, marking a significant shift from the current T+1 settlement cycle applicable to all stock transactions.
The transition to a T+0 cycle means that trades will be settled on the same day they are executed, ensuring instant settlement and potentially increasing the efficiency and liquidity of the stock market. This initiative is part of SEBI’s broader strategy to enhance the operational dynamics of India’s financial markets and align them more closely with global best practices.
Last year, Buch had outlined SEBI’s goal to implement the T+0 settlement norm by the end of March 2024, with aspirations to achieve T plus instantaneous settlement within the following 12 months. This ambitious move will position India as the second country, after China, to adopt such a rapid settlement cycle. Most major economies around the world currently operate on a T+2 settlement cycle, taking two days to complete trade settlements.
The optional nature of the T+0 settlement allows market participants to choose this expedited process based on their trading strategies and liquidity needs. This flexibility is expected to cater to a wide range of investors, from high-frequency traders seeking agility in their transactions to retail investors looking for quicker access to their funds.
By shortening the settlement period, SEBI aims to reduce market risk and improve the overall trading experience. However, the success of this initiative will depend on the readiness of market infrastructure and the willingness of participants to adapt to the faster settlement cycle.
