Instant Settlement In Securities Market May Not Be Far Off, Says SEBI

SEBI Chairperson Madhabi Puri Buch signalled efforts to bring instantaneous settlement to India's stock exchanges.

The regulator is working on quick settlement mechanisms by collaborating with several parties, she said on Monday. This comes amid the monetary benefits seen from technology-driven regulatory measures undertaken by SEBI, Buch said.

She highlighted that the Indian securities markets moved from T+2 to T+1, and the technology stack available today can bring in a mechanism where trades can be settled instantaneously with entities getting money and the securities.

"We believe that in the cash equity segment where T+1 exists, instant settlement can be done."

According to her, the regulator's actions over the years have cumulatively released Rs 3,500 crore to the market on an annual basis. This is, however, only the interest value or time value of money freed up; the real amount involved is much more, she said.

In the financial year 2023, the Application Supported Blocked Amount mechanism in the primary market will have freed up Rs 260 crore, solely in interest value. "But when we move to ASBA for trading in the secondary market, the benefit is nearly 10 times greater," she said.

In March 2023, SEBI approved an ASBA-like facility for the stock market, which ensures that money from an investor gets moved only when a settlement happens.

Assuming that every client chooses to use this mechanism across segments, it could free up to Rs 2,300 crore in a financial year for the Rs 58,000 crore in margin they reported during that fiscal. This is merely considering the qualified stock brokers, and the number would rise once it was extended to other stock brokers, she said.

The introduction of the T+1 settlement mechanism in the equity cash segment is yet another technology measure that has hugely benefited the ecosystem, she said. SEBI had introduced a T+1 settlement mechanism on an optional basis in February 2022. The transition was completed in January 2023. It freed up Rs 700 crore annually in interest value for an amount involved worth Rs 9,900 crore.

In the mutual fund segment, the reduction of the redemption period to T+3 has also benefited investors. Assuming that Rs 24 lakh crore is the amount involved in the equity and hybrid schemes in the financial year 2023, the annual benefit accrued to investors is Rs 230 crore.