The Securities and Exchange Board of India (SEBI) on September 7 introduced T+1 (Trade plus 1 day) rolling settlement cycle for stocks on an optional basis with effect from January 1, 2022.
The change has been adopted by the SEBI after it received requests from various stakeholders to further shorten the settlement cycle.
SEBI circular
“Based on discussions with Market Infrastructure Institutions (Stock Exchanges, Clearing Corporations and Depositories), it has been decided to provide flexibility to Stock Exchanges to offer either T+1 or T+2 settlement cycle.”
Mandatory for 6 months if adopted
SEBI further noted that a stock exchange will have to mandatorily continue with the same for a minimum period of six months after opting for T+1 settlement cycle for a scrip.
In case the stock exchange wishes to switch back to T+2 settlement cycle, it will have to give one-month notice to the market.
Applicable on all trade
The regulator also said the new settlement option would be applicable to all types of transactions (regular as well as block deals) in the chosen security on that stock exchange.
For example, if a stock is placed under the T+1 settlement on a stock exchange, the regular market deals and block deals will follow the T+1 settlement cycle on that stock exchange.
However, SEBI made it clear that there will be no netting between T+1 and T+2 settlements.
Benefit:
The change to a shorter cycle is likely to benefit retail investors, who will get quicker access to cash and securities after trades are executed.
It will also reduce the risks associated with fluctuations of stocks during the settlement cycle.
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