Sebi issues framework for beta version of T+0 settlement; to start with 25 scrips and limited trade timing

This settlement cycle will be available as an option

The Securities and Exchange Board of India (Sebi) on March 21 issued framework for implementing the beta version of same-day or T+0 settlement on an optional basis, in addition to the T+1 settlement cycle.

To start with, this option will be available in the equity cash segment for 25 scrips and through a limited set of brokers. All investors will be allowed to participate in this segment and trade timing for will be between 9.15 am and 1.30 pm.

Also read: MC Explains: What is T+0 trade settlement and what are its challenges?

"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," the markets regulator said in a circular.

The SEBI board met on March 15.

In the circular detailed why the market was ready for this faster settlement cycle and how it would help investors.

The circular said, "The significant evolution of technology, architecture and capacity of MIIs (market infrastructure institutions), 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."

On how it would help the ecosystem, the circular stated, "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."

This settlement cycle is available in few other countries such as Russia and South Korea at some of its exchanges. Taiwan's Taiwan Stock Exchange (TWSE) and Hong Kong's Hong Kong Stock Exchange (HKEX) offers this settlement cycle for certain securities.

How will it work?

The circular gave the operational guidelines as follows:

1.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.

2. Surveillance Measures: The surveillance measures as applicable in T+1 settlement cycle shall be applicable to scrips in T+0 settlement cycle.

3.Trade Timings: One continuous trading session from 09:15 AM to 1:30 PM.

4.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.

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5.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.

6.Netting of Obligations: There shall be no netting in pay-in and pay-out obligations between T+1 and T+0 settlement cycle.