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The Securities and Exchange Board of India has recently, on 21st March 2024, vide circular no SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/20, issued a circular on a subject introduction of the beta version of the T+0 rolling settlement cycle on an optional basis in addition to the existing T+1 settlement cycle in equity cash markets. However, this Circular introduces an optional system settlement in addition to the existing T+1 settlement cycle in the equity cash market, specifying a limitation of 25 scrips and a limited number of brokers.
Earlier SEBI vide circular No. SEBI/HO/MRD2/DCAP/P/CIR/2021/628 dated 7th September 2021 has introduced a settlement with a beta version of T+1 and was fully implemented with effect from 27th January 2023.
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This transition or addition of a settlement option of T+0 with the existence of T+1 settlement was possible because of the significant evolution of technology, architecture, and capacity of market Infrastructure Institutions (MIIs) for robust risk management frameworks such as stock exchanges, clearing corporations, and depositors. Moreover, this decision to introduce an additional settlement option of T+0 was considered or approved by SEBI only after careful consideration of the recommendations given by the working group, such as MIIs, public comments, and inputs from the SEBI risk management review committee. Additionally, shortening the settlement cycle to T+0 results in cost savings, efficiency with time, and transparency among investors, as well as enhances the risk management system.
Given below are the guidelines provided by the SEBI in this Circular:
All investors are eligible to participate in the settlement option of T+0 if they fulfil the requirements according to the MIIs, such as timelines, procedures, and various other risk requirements.
Just like the surveillance measures taken in T+1, the same is also applicable in T+0 settlement cycles.
The timings of the trading shall continue from 9:15 am to 1:30 pm.
T+0 segment price movement will operate under the price band of +/-100, a basic point from the T+1 market price, with recalibration after every 50-basis point movement in the underlying T+1 market.
These T+0 prices will not hinder the index calculations or settlement price computation. However, there is no extra closing price on securities based on the T+0 trading segment.
There is no permission for the netting of obligations between the T+1 and T+0 settlement cycle options.
Here are the insights and key take away from the Circular:
Thus, this Circular is an instruction given to the MIIs to take a necessary step in implementing this new instruction on the settlement cycle in the equity cash market, which shall come into effect from 28th March 2024. With this notification, a new settlement option for the T+0 beta version has been introduced along with the previous settlement option for the T+1 option, which involves a restricted number of brokers by focusing on a limited set of securities. The concerned authority with these circulars aims to check the feasibility of such a settlement option by evaluating the impact of T+0 before a potentially wider option is made available to investors. Thus, SEBI has introduced this to protect the interests of investors in the securities market.
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