Introduction to T+0 Settlement Cycle
The T+0 settlement cycle marks a significant evolution in the Indian stock market, offering a more efficient trading environment by enabling the transfer of securities and funds on the same trading day. This initiative is set to run alongside the existing T+1 settlement cycle, fostering increased liquidity and minimizing market risk.
What is T+0 Settlement?
T+0, or Trade + 0 days, refers to the settlement of trades on the same day they are executed. Unlike the traditional T+1 cycle, where transactions are settled the next day, T+0 promises immediate settlement, enhancing the speed and efficiency of trading activities.
The Launch of T+0 Settlement
The Bombay Stock Exchange (BSE) announced the introduction of a beta version of the T+0 settlement, scheduled to start on March 28, 2024. This move follows the Securities and Exchange Board of India (SEBI)’s directive, aiming to test the waters with a select list of 25 scrips, including majors like Ambuja Cements, Bajaj Auto, and State Bank of India, among others.
List of Stocks Available for T+0 Settlement (Beta Version)
| S.No. | Company Name |
|---|---|
| 1 | Ambuja Cements |
| 2 | Ashok Leyland |
| 3 | Bajaj Auto |
| 4 | Bank of Baroda |
| 5 | Bharat Petroleum Corporation Ltd |
| 6 | Birlasoft |
| 7 | Cipla |
| 8 | Coforge |
| 9 | Divi’s Laboratories |
| 10 | Hindalco Industries |
| 11 | Indian Hotels |
| 12 | JSW Steel |
| 13 | LIC Housing Finance |
| 14 | LTIMindtree |
| 15 | MRF |
| 16 | Nestle India |
| 17 | NMDC |
| 18 | Oil and Natural Gas Corporation |
| 19 | Petronet LNG |
| 20 | Samvardhana Motherson International |
| 21 | State Bank of India |
| 22 | Tata Communications |
| 23 | Trent |
| 24 | Union Bank of India |
| 25 | Vedanta |
Why the Shift to T+0?
The transition towards a T+0 settlement cycle is driven by the need to enhance market efficiency and liquidity. It also addresses the competitive pressure from alternative trading mechanisms, such as cryptocurrencies, ensuring that the regulated market remains attractive to investors.
How Will T+0 Settlement Work?
Initially, the T+0 cycle will be optional and limited to a specific list of scrips and brokers. The charges applicable to T+1 settlements, such as transaction charges, Securities Transaction Tax (STT), and regulatory fees, will also apply to T+0 settlements.
Impact on the Market
The introduction of T+0 settlement is expected to boost liquidity in the market by making funds and securities available more rapidly. However, it also poses challenges, particularly for brokers’ business models, necessitating adjustments to accommodate the faster settlement process.
SEBI’s Role and Future Plans
SEBI’s proactive approach in implementing the T+0 settlement highlights its commitment to keeping the Indian stock market competitive and investor-friendly. The regulatory body has laid out a phased plan, aiming for an instant settlement cycle by March 2025, thereby pushing the envelope in trading efficiency.
The move towards a T+0 settlement cycle is a game-changer for the Indian stock market, promising to enhance liquidity, reduce risk, and make the market more competitive globally. As the beta version rolls out, it will be crucial to monitor its impact on the market dynamics and the adaptations required by market participants to thrive in this accelerated trading environment.
