March 28, 2024
1 minute reading
Introduction to Settlement Cycle T+0
The T+0 settlement cycle marks a significant development in the Indian stock market, offering a more efficient trading environment by enabling the transfer of securities and funds on the same trading day. This initiative is set to run alongside the existing T+1 settlement cycle, fostering increased liquidity and minimizing market risk.
What is T+0 Settlement?
T+0, or Transaction + 0 days, refers to the settlement of trades on the same day they are executed. Unlike the traditional T+1 cycle, where trades are settled the next day, T+0 promises immediate settlement, enhancing the speed and efficiency of trading activities.
The start of settlement T+0
The Bombay Stock Exchange (BSE) has announced the introduction of a beta version of T+0 settlement, which is scheduled to start on March 28, 2024. This move follows the directive of the Securities and Exchange Board of India (SEBI), aimed at testing the waters with a shortlist of 25 scripts, including majors like Ambuja Cements, Bajaj Auto and State Bank of India, among others.
List of stocks available for T+0 settlement (Beta version)
| S.No. | Company Name |
|---|---|
| 1 | Ambuja Cement |
| 2 | Ashok Leyland |
| 3 | Bajaj Auto |
| 4 | Bank of Baroda |
| 5 | Bharat Petroleum Corporation Ltd |
| 6 | Birlasoft |
| 7 | Cipla |
| 8 | Coforge |
| 9 | Divi’s Laboratories |
| 10 | Hindalco Industries |
| 11 | Indian hotels |
| 12 | JSW Steel |
| 13 | LIC Housing Finance |
| 14 | LTIMindtree |
| 15 | MRF |
| 16 | Nestle India |
| 17 | NMDC |
| 18 | Oil and Natural Gas Company |
| 19 | Petronet LNG |
| 20 | Samvardhana Motherson International |
| 21 | State Bank of India |
| 22 | Tata Communications |
| 23 | Trend |
| 24 | Union Bank of India |
| 25 | Vedanta |
Why Shift to T+0?
The move to a T+0 settlement cycle is driven by the need to enhance market efficiency and liquidity. It also counters competitive pressure from alternative trading mechanisms such as cryptocurrencies, ensuring that the regulated market remains attractive to investors.
How will T+0 settlement work?
Initially, the T+0 cycle will be optional and limited to a specific list of scenarios and brokers. Charges applicable to T+1 settlements, such as transaction charges, Securities Transaction Tax (STT) and regulatory fees, will also apply to T+0 settlements.
Effects on the market
The introduction of T+0 settlement is expected to enhance liquidity in the market by making funds and securities available faster. However, it also poses challenges, particularly for brokers’ business models, which require adjustments to facilitate a faster settlement process.
Role and future plans of SEBI
SEBI’s proactive approach in implementing the T+0 settlement underlines its commitment to keep the Indian stock market competitive and investor-friendly. The regulator has drawn up a phased plan, aiming for a direct settlement cycle by March 2025, thus pushing the envelope on trading efficiency.
The move to a T+0 settlement cycle is a game-changer for the Indian stock market, promising to enhance liquidity, reduce risk and make the market more globally competitive. As the beta rolls out, it will be important to monitor its impact on market dynamics and the adjustments required by market participants to thrive in this accelerating trading environment.
