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Securities and Exchange Board of India (SEBI), which had in July announced it was working to launch real-time settlement of trades, is now planning to implement one-hour settlement of trades first.
The regulator is aiming to launch one-hour settlement of trades by March next year, its Chairperson Madhabi Puri Buch said on Tuesday. She also said the Application Supported by Blocked Amount (ASBA)-like facility for trading in the secondary market will likely be launched in January 2024.
Settlement is a two-way process which involves the transfer of funds and securities on the settlement date. A trade settlement is said to be complete once purchased securities of a listed company are delivered to the buyer and the seller gets the money.
The current cycle of T+1 means trade-related settlements happen within a day, or 24 hours of the actual transactions. The migration to the T+1 cycle came into effect in January this year. India became the second country in the world to start the T+1 settlement cycle in top-listed securities after China, bringing in operational efficiency, faster fund remittances, share delivery, and ease for stock market participants.
What has SEBI said?
“On the way to instantaneous settlement, we believe that the one-hour trade settlement is much quicker to implement than instantaneous. So, if the instantaneous is going to take another 6-7 months, we will implement one-hour trade settlement before that,” Buch told reporters on the sidelines of the Global Fintech Fest.
The technology for implementation of one-hour trade settlement exists but for instantaneous trade settlement, the system needs some additional technology development, which may take more time. She expects the instantaneous trade settlement to be launched by the end of 2024.
What are the benefits of one-hour trade settlement?
Under the current T+1 settlement cycle, if an investor sells securities, the money gets credited into the person’s account the next day. In one-hour settlement, if an investor sells a share, the money will be credited to their account in an hour, and the buyer will get the shares in their demat account within an hour.
