How will T+0 settlement cycle benefit investors, which securities are eligible?

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

The idea for a same day settlement cycle was first floated by SEBI December last year. (Pixabay/Representational)

4 min readNew DelhiMar 29, 2024 11:45 AM IST First published on: Mar 28, 2024 at 09:15 AM IST

The BSE and NSE introduced trading in the T+0 rolling settlement cycle in the equity segment on an optional basis today. The beta version of the optional T+0 settlement cycle, or same-day settlement, was launched for a set of 25 scrips, and with a limited set of brokers.

Last week, the Securities and Exchange Board of India (SEBI) issued operational guidelines for the launch of the shorter tenure settlement cycle.

What is the T+0 trading settlement cycle?

In December last year, the capital markets regulator SEBI proposed to introduce a facility for clearing and settlement of funds and securities on T+0 (same day) on an optional basis, in addition to the existing T+1 settlement cycle. The regulator has also proposed to introduce optional instant settlement at a later stage.

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Under the T+0 trade cycle, the settlement of trades will happen on the same day after the closure of the T+0 market. If investors sell a share, they will get the money credited to their account the same day, and the buyer will also get the shares in their demat account on the very day of the transaction.

What are the benefits of T+0 trade settlement?

A shortened settlement cycle will bring cost and time efficiency, transparency in charges to investors, and strengthen risk management at clearing corporations and the overall securities market ecosystem.

The T+0 trade cycle is expected to provide flexibility in terms of faster pay-out of the funds against the securities to the sellers and faster pay-out of securities against the funds to the buyers. It will allow better control over funds and securities by the investors.

For the securities market ecosystem, a shorter settlement cycle will further free up capital in the securities market, thereby enhancing the overall market efficiency. It will enhance the overall risk management of Clearing Corporations (CCs) as the trades are backed by upfront funds and securities.

Which securities are available for trading in the T+0 settlement cycle?

The stock exchanges said Ambuja Cements Ltd, Ashok Leyland Ltd, Bajaj Auto Ltd, Bank of Baroda, Bharat Petroleum Corporation Ltd, Birlasoft Ltd, Cipla Ltd, Coforge Ltd, Divi’S Laboratories, Hindalco Industries, The Indian Hotels Company Ltd, JSW Steel Ltd and LIC Housing Finance are among the set of 25 scrips which are allowed for trading on T+0 settlement cycle.

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The other securities include LTIMindtree Ltd, Samvardhana Motherson International Ltd, MRF Ltd, Nestle India, NMDC Ltd, Oil & Natural as Corporation Ltd, Petronet LNG Ltd, State Bank of India, Tata Communications Ltd, Trent Ltd, Union Bank of India and Vedanta Ltd.

Who can participate in the T+0 settlement cycle?

All investors are eligible to participate in the segment for the T+0 trade settlement cycle if they are able to meet the timelines, process and risk requirements as prescribed by the Market Infrastructure Institutions (MIIs).

What are the trade timings? What will be the price band in the T+0 trade cycle?

For the optional T+0 settlement cycle, there will be one continuous trading session from 09:15 AM to 1:30 PM. The settlement of funds and securities will be completed on the same day by 4:30 PM.

The price band in the T+0 segment will operate with a price band of +100 basis points from the price in the regular T+1 market. This band will be recalibrated after every 50 basis points movement in the underlying T+1 market.