Context:
SEBI has extended the implementation timeline for the optional T+0 (same-day settlement) cycle for qualified stock brokers (QSBs) to November 1, 2025, from the initial deadline of May 1, 2025.
Reason for extension: The extension was granted based on feedback from QSBs, along with consultations with stock exchanges, clearing corporations, and depositories, to ensure smoother implementation.
T+0 Settlement Cycle
A T+0 settlement cycle means that a stock trade is settled on the same day it’s executed. This means that the buyer receives the shares and the seller receives payment on the same trading day. Previously, India used a T+1 system where settlement occurred the next business day.
- T+0 vs. T+1: T+0 refers to a trade being settled on the same day it’s made (T), while T+1 means it’s settled on the next business day after the trade.
- Mechanism: In T+0, the transfer of shares to the buyer and funds to the seller happens within the same day.
Implementation Challenges
- Operational challenges: Most major brokers are operationally unprepared for offering the same-day settlement cycle, as their risk management and order management systems are not designed to handle the scale required for such a cycle.
- Few brokers offering T+0: As of now, very few brokers offer the T+0 settlement option to clients, primarily due to system limitations.
Background on T+0 Settlement Cycle
- Introduction of T+1 cycle: India became the first country to implement the T+1 settlement cycle for all listed stocks on January 27, 2023.
- T+0 settlement expansion: On March 28, 2024, SEBI introduced the optional T+0 settlement cycle, initially applicable to 25 scrips, with plans to expand it to the top 500 stocks by January 31, 2025.
- The expansion will occur gradually, starting with stocks from the bottom 100 companies and adding 100 companies every month.
Impact on QSBs and Investor Participation
- QSB requirements: QSBs must implement the necessary systems and processes to enable seamless participation in the optional T+0 settlement cycle.
- Client eligibility: Investors wishing to trade under the T+0 cycle must engage with brokers who are equipped to offer this feature.
Industry Implications
- System and process readiness: SEBI’s decision to extend the deadline aims to ensure that brokers have adequate time to prepare their systems to handle the optional T+0 settlement efficiently.
