Investors will soon have the option to settle their stock market trades on the same day and subsequently on real-time basis. The Securities and Exchange Board of India (Sebi) on Friday proposed to introduce an optional T+0 (same day) and instantaneous settlement of trades in the equity cash segment. The shorter settlement cycle will be available alongside the existing T+1 cycle.
In the T+1 system, stocks and funds are settled by the next day of the trade. This was implemented in January 2023.
Sebi said an instant settlement mechanism enables instant receipt of funds and securities and eliminates the risk of settlement shortages, since both funds and securities will be required to be available before placing the order.
It also eliminates the risk for market participants and reduces the risk exposure of Clearing Corporations (CCs), said Sebi.
The capital markets regulator, in a consultation paper released on Friday evening, has proposed to introduce the shorter settlement cycle in two phases.
In phase one, Sebi is planning to bring in the T+0 settlement cycle. Here, for share trades done till 1.30 PM, settlement of funds and securities will be completed on the same day by 4.30 PM.
In phase 2, the regulator will introduce an optional immediate trade-by-trade settlement for transactions to be carried out till 3.30 pm.
The regulator said after the implementation of optional instant settlement, the mechanism of optional T+0 settlement implemented under phase 1 would be discontinued.
For the same day (T+0) settlement, investors handling their trades and settlements through custodians would be excluded. Brokers said these investors would include institutional investors mainly foreign funds. However, in real-time settlement, all investors including those settling through custodians would be allowed.
"Considering the timelines required for processing of custodial trades, and limited availability of time for completion of settlement, and as they are currently exempt from margin requirements, it is proposed to exclude custodian clients in phase 1," Sebi said.
To begin with, T+0 settlement would be made available in top 500 listed equity shares based on the market capitalisation. This will be done in three tranches of 200, 200, 100 from lowest to highest market cap, it said.
The regulator said exchanges would create a separate scrip code for T+0. It has also proposed to impose a 1% price band for a stock between two settlements.
"The issue of divergence of prices for same scrip between the two segments (T+0 or Instant settlement cycle, and T+1 settlement cycle), can also be addressed by introduction of price bands between segments (of say + 100 basis points), which ensure limited divergence in the prices between the T+1 settlement cycle and T+0 or instant settlement cycle," Sebi said.
"Further, with increase in participation in this segment and active arbitrages, the divergence in prices may be reduced."
There would be only one continuous session from 9.15 am to 1.30 pm and no pre-open or block or post close sessions in the same day settlement segment, Sebi said.
No comments:
Post a Comment