SEBI introduced a consultation paper for T+0 settlement

The Securities and Exchange Board of India (SEBI) has issued a consultation paper before implementing same-day settlement in the stock market. The market regulator has sought public opinion on its proposal till January 12.

SEBI has said in the consultation paper that instant settlement will be implemented in two phases. The same-day settlement will be implemented in the first phase of the T+0 settlement, after which buyers will get share allotment on the same day and sellers will get funds on the same day.

That means if you trade shares till 1:30 pm on the trading day, they will be settled by 4:30 pm. In its second phase, an optional immediate quarter-by-trade settlement facility will be provided for all transactions done till 3:30 pm.

This system of short-time settlement will be an option along with the existing T+1 cycle of settlement. This will increase liquidity in the market. At present, the T+0 settlement system will be applicable for trading in the top 500 listed companies in terms of market capitalization.

Earlier, SEBI Chief Madhuri Puri Buch had said that the market regulator is preparing to make changes in the trade settlement rules. He had said that we are preparing to reduce the trade settlement time to 1 hour by March next year (2024) and then immediately implement trade settlement by October 2024.

There was a T+5 settlement system in India before 2002. SEBI implemented a T+3 settlement in 2002. Next year in 2003, the T+2 settlement was implemented. After this, the market continued to work on the same system till 2021.

Then in 2021, the T+1 system was introduced. It was implemented in January this year (2023). Due to this, settlement of funds and shares started taking place within 24 hours. At present the market is working on this system. According to SEBI, the T+0 settlement system will be fully operational by January 2025.

Settlement system means official transfer of shares to the buyer account and cash transfer of sold shares to the seller account. Indian stock exchanges currently follow T+1. This means that the funds and securities will be credited to your account within 24 hours of order execution.

Suppose you sold shares on Wednesday. According to T+1, the money for these shares will be transferred to your account in 1 business day. If you have purchased shares then these shares will be credited to your demat account within 1 day. This same rule also applies in T+2 and T+3 settlements.