Stock exchanges are set to launch the same-day transaction settlement (or "T+0") beta version for a select few cash segment stocks starting today ( Thursday, March 28).
The T+0 settlement will occur concurrently with the current T+1 settlement cycle. Presently, the market is considering same-day transaction settlement within a year after fully embracing the T+1 cycle.
Sellers under the present T+1 system may only get 80% of their cash on the day of sale; the remaining 20% must be waited for the following day. Nonetheless, sellers will have instant access to 100% of their cash on the day of transaction due to the new T+0 settlement system.
There will be two stages to the T+0 settlement cycle. Phase 1 deals made up to 1:30 pm will be taken into account for the settlement, which must be finished by 4:30 pm. Trading will begin at 1:30 pm and last until 3:30 pm in the second phase and the first phase will be discontinued.
"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!
Subject to recalibration after every 50 basis point change, a price band of -100 basis points from the standard T 1 market price will be in place. Index computation and settlement price computation are unaffected by T 0 pricing.
Prashanth Tapse, Research Analyst, Sr VP Research of Mehta Equities, said that introducing the T+0 settlement would be of great benefit for traders and investors who are looking for immediate liquidity, allowing them to utilise funds and react to the market quickly in the highly volatile sessions.
"I feel this could be highly beneficial to retailers who come with limited cash into the market, and this would revolutionise the trading landscape for the same small investors. Shortening of the settlement cycle means optimal utilisation of funds to make best-in-time returns to swing traders," added Tapse.
A framework to adopt the T+0 trade settlement cycle's beta version on an optional basis was previously released by markets regulator Securities and Exchange Board of India (SEBI).
For a first 25 scrips and a limited set of brokers, exchanges will implement a shortened trading cycle. After evaluating the results at the three- and six-month marks, capital market regulator SEBI will determine the next step.
NSE T+0 settlement starting today with 25 stocks, including State Bank of India (SBI), MRF, Hindalco, and Vedanta, would be eligible for the T+0 settlement cycle. Among the others are Ambuja Cements, Ashok Leyland, Bajaj Auto, Bank of Baroda, Bharat Petroleum Corporation Ltd (BPCL), Birlasoft, Cipla, Coforge, Divi's Laboratories, Hindalco Industries, Indian Hotels Company Ltd, JSW Steel, LIC Housing Finance, LTIMindtree, Samvardhana Motherson International, MRF, Nestle India, NMDC, Oil and Natural Gas Corporation (ONGC), Petronet LNG, SBI, Tata Communications, Trent, Union Bank of India, and Vedanta.
25 stocks will be eligible for the T+0 settlement cycle under the BSE T+0 settlement, including Ambuja Cements, Bajaj Auto, BPCL, Cipla, SBI, and Vedanta.
Also Read: BSE to launch beta version of T+0 settlement next week. Check date, other details
The others are: LIC Housing Finance; JSW Steel; Indian Hotels; Ashok Leyland; Bajaj Auto; Bank of Baroda; Bharat Petroleum Corporation Ltd; Birlasoft; Cipla; Coforge; Divi's Laboratories; LIC Housing Finance; LTIMindtree; MRF; Nestle India; NMDC; Oil and Natural Gas Corporation; Petronet LNG; Samvardhana Motherson International; State Bank of India; Tata Communications; Trent; Union Bank of India; and Vedanta.
Further Tapse highlighted that this shift will substantially reduce the risk exposure for retail investors, and the system guarantees same-day access to funds and securities, thereby mitigating counterparty and duration risks. SEBI's aim is to boost investor confidence and simplify the trading process for retail investors. However, there may be some technical limitations and glitches in the early days for all the counterparties due to the high volume of trades. Overall, it is a win-win game for all sets of investors.
With real-time settlement, Indian exchanges show their commitment to staying up to date with innovation and boosting market competition, according to Sunil Nyati, Managing Director of Swastika Investmart Ltd. A more dynamic and robust market environment is established by this shift. Investors need to be cautious as they become used to T+0 settlement. To seize chances and meet the new challenges this change presents, they should make use of technology, smart risk management, and market expertise.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.