Introduction: The Securities and Exchange Board of India (SEBI) has introduced a significant update to the settlement cycle in equity cash markets. With the introduction of the beta version of T+0 settlement cycle, SEBI aims to enhance efficiency, transparency, and risk management in the securities market ecosystem. This article explores the details of this circular and its implications.
Detailed Analysis
1. Background: SEBI had previously introduced the T+1 rolling settlement cycle, which was fully implemented in January 2023. The evolution of technology and India’s robust payments and settlements ecosystem have paved the way for further advancements in clearing and settlement timelines.
2. Benefits of Shortened Settlement Cycle: The introduction of the T+0 settlement cycle offers several advantages, including cost and time efficiency, transparency in charges to investors, and strengthened risk management at clearing corporations. This move aligns with global standards and enhances the competitiveness of Indian markets.
3. Operational Guidelines: The beta version of T+0 settlement cycle will be optional and limited to a set of 25 scrips and a limited number of brokers. Eligible investors must meet prescribed timelines, processes, and risk requirements. Surveillance measures applicable to the T+1 settlement cycle will also apply to scrips in the T+0 segment.
4. Trade Timings and Price Band: The trading session will be continuous from 09:15 AM to 1:30 PM. The price band in the T+0 segment will operate within +100 basis points from the price in the regular T+1 market, with periodic recalibration based on market movements.
5. Index Calculation and Settlement Price: T+0 prices will not be considered in index calculation and settlement price computation. There will be no separate close price for securities based on trading in the T+0 segment.
6. Implementation and Monitoring: MIIs will publish operational guidelines and FAQs, disseminate the list of participating brokers, and provide regular progress reports on the beta version of T+0 settlement cycle. The circular will come into force on March 28, 2024.
Conclusion: SEBI’s introduction of the beta version of T+0 settlement cycle marks a significant milestone in India’s securities market landscape. By leveraging technological advancements and aligning with global best practices, this move underscores SEBI’s commitment to promoting efficiency, transparency, and investor protection. As stakeholders adapt to the new framework, ongoing monitoring and stakeholder consultation will be crucial for ensuring the smooth transition and continued development of the securities market ecosystem.
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Securities and Exchange Board of India
Circular No.SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/20 Dated:March 21, 2024
All Recognized Stock Exchanges
All Recognized Clearing Corporations
All Depositories
Dear Sir/ Madam
Subject: Introduction of Beta version of T+0 rolling settlement cycle on optional basis in addition to the existing T+1 settlement cycle in Equity Cash Markets
1. SEBI vide Circular No. SEBI/HO/MRD2/DCAP/P/CIR/2021/628 dated September 07, 2021 allowed for introduction of T+1 rolling settlement cycle. All stock exchanges, clearing corporations and depositories (collectively referred to as “Market Infrastructure Institutions (MIIs)”) jointly decided to shift to T+1 settlement cycle in a phased manner, which was fully implemented w.e.f. January 27, 2023.
2. The significant evolution of technology, architecture and capacity of MIIs, presents opportunities for further advancing clearing and settlement timelines. Further, India’s depository ecosystem has visibility of individual client level holdings in digital form, and so has the ability to effect immediate transfer of securities and also India’s payments and settlements ecosystem has long allowed for real time transfer of funds.
3. 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.
4. Accordingly, based on the recommendations of Working Group consisting of MIIs, public comments, and recommendations of Risk Management Review Committee of SEBI, a proposal on introduction of optional T+0 settlement and subsequent optional Instant Settlement, in addition to the existing T+1 settlement cycle was placed before SEBI Board for approval.
5. Pursuant to deliberations and approval of the Board, it has been decided to put in place a framework for introduction of the Beta version of T+0 settlement cycle on optional basis in addition to the existing T+1 settlement cycle in equity cash market, for a limited set of 25 scrips and with a limited number of brokers.
6. The operational guidelines in this regard are as under:
a. Eligible Investors: All investors are eligible to participate in the segment for T+0 settlement cycle, if they are able to meet the timelines, process and risk requirements as prescribed by the MIIs.
b. Surveillance Measures: The surveillance measures as applicable in T+1 settlement cycle shall be applicable to scrips in T+0 settlement cycle.
c. Trade Timings: One continuous trading session from 09:15 AM to 1:30 PM.
d. Price Band: The price 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 re-calibrated after every 50 basis points movement in the underlying T+1 market.
e. Index calculation and settlement price computation: T+0 prices will not be considered in index calculation and settlement price computation. There shall be no separate close price for securities based on trading in T+0 segment.
f. Netting of Obligations: There shall be no netting in pay-in and pay-out obligations between T+1 and T+0 settlement cycle.
7. To ensure smooth implementation, the MIIs shall publish other operational guidelines (including mechanism for trading, clearing and settlement, risk management, etc.) and Frequently Asked Questions (FAQs) along with the list of 25 scrips for the Beta version of T+0 settlement cycle and disseminate the same on their respective websites.
8. On periodic basis, MIIs shall disseminate the list of brokers that are participating in the Beta version of T+0 settlement cycle on their websites.
9. MIIs shall provide a fortnightly report on the progress of activities in the Beta version of T+0 settlement cycle till further direction.
10. The provisions of this circular shall come into force with effect from March 28, 2024.
11. SEBI shall continue to do further stakeholder consultation including with users of the Beta version of T+0 settlement cycle.
12. All MIIs are advised to:
a. take necessary steps and put in place necessary systems for implementation of the above;
b. make necessary amendments to the relevant bye-laws, rules and regulations, wherever required, for the implementation of the above; and
c. bring the provisions of this circular to the notice of market participants (including investors) and also to disseminate the same on their websites;
13. This circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act 1992, read with Regulation 51 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, Section 26(3) of the Depositories Act, 1996 and Regulation 97 of Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
14. This circular is available on SEBI website at sebi.gov.in at “Legal Framework – Circulars”.
Yours faithfully,
Hruda Ranjan Sahoo
Deputy General Manager
Market Regulation Department
Tel. No.: 022-26449586
E-mail: hrsahoo@sebi.gov.in
