SEBI Launches T+0 Settlement Cycle, What Is It & How Will It Benefit Investors?

Sellers in the T+1 system may get only 80% of their cash on the day of sale; the remaining 20% they may receive on the next day. In a T+0 settlement, sellers will get 100% of their cash on the day of transaction.

Last week, the market regulator Securities and Exchange Board of India (SEBI) issued a circular for launching the beta version of T+0 settlement which is launched on 28th March 2024.

Under the T+0 cycle, the settlement of trades will happen on the same day after the closure of the T+0 market.

What Is T+0 Settlement?

Currently, the Indian stock market operates on a T+1 settlement cycle for all scripts. T+0 means all settlements will happen on the same day. Instant settlement will help the traders to settle trades immediately. 

Earlier, SEBI chairperson had given hints about this decision. Wherein she had said that SEBI wants the T+0 settlement norm to be in place from March-end 2024 and T plus instantaneous settlement 12 months from thereon.

What Are The Benefits Of T+0 Trade Settlement?

• Fastest settlement cycle will give cost and time efficiency, transparency to the investors. It will also reduce the risk involved in waiting till the next operational day and strengthen the overall securities market ecosystem.

• Sellers in the T+1 system may get only 80% of their cash on the day of sale; the remaining 20% they may receive on the next day. In a T+0 settlement, sellers will get 100% of their cash on the day of transaction.

T+0 Trade Settlement Cycle

(SEBI) said the optional T+0 will work alongside the existing T+1 settlement.In T+1, trades are settled within 24 hours of execution.

However, T+0 settlement will be only for trades executed between 09:15 a.m. to 1:30 p.m. IST, the circular said.

Exchanges would disclose the list of the 25 stocks eligible for T+0 settlement on their websites, SEBI said, without saying when these stocks will be disclosed.

In Phase 1,

• An optional T+0 cycle can be implemented for trades taken till 1:30 pm. 
• Then the settlement of funds and securities is to be completed by 4:30 pm.

In Phase 2, 

• It will be an optional instant trade-to-trade settlement for both funds and securities, which will be done till 3:30 pm. 
• After this kind of settlement is implemented, Phase 1 of optional T+0 will be discontinued.

(With Inputs From Reuters)