Market regulator Securities and Exchange Board of India (SEBI) is planning to roll out one-hour trade settlements soon. This will be followed by instantaneous settlement, said SEBI chairperson Madhabi Puri Buch at the Global Fintech Fest 2023.
"My belief, cemented by my observation over last few years, is that incumbents are now morphing into fintechs. For instance, stock exchange is now a Fintech. From T+2 settlement, we have moved to T+1. We are now talking about moving from T+1 to instantaneous settlement," she said.
"When incumbents, who have the cashflow and the manpower, put their mind to it and apply modern technology, they become new rocketships," she added.
While Buch did not disclose any timeline for the transition to one-hour trade settlements, market sources said that it is likely to be implemented by March 2024. Instantaneous settlement will be implemented six months after that, sources added.
In January 2023, Indian stock exchanges shifted to a shorter and faster ‘trade-plus-one’ (T+1) settlement cycle, marking a significant milestone in capital markets. Prior to that, India was following the T+2 rolling settlement principle.
The T+1 settlement rule simply means that all trade-related settlements must be finished within a day or 24 hours. For example, if you are an investor and bought 50 shares on Monday, these should reflect in your Demat account on Tuesday.
Lauding the transition to T+1 cycle, MSCI said in June that a shorter settlement cycle brings numerous benefits such as enhanced investor protection, risk reduction in the financial system, and increased operational and capital efficiency while heightening resiliency in the securities market.
India is the second country after China to have implemented T+1 trade settlement. Earlier this year, the US and Canada announced that the transition to T+1 will take place in May 2024.
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