SEBI Proposes Two Optional Settlement Cycles For Trade

The Securities and Exchange Board of India has recently unveiled a consultation paper introducing potential changes to settlement cycles in the stock market.

These proposed changes include the introduction of two optional settlement cycles—the T+0 Settlement Cycle and the Instant Settlement Cycle. Unlike the traditional T+1 (Trade Day + 1 day) cycle, these new options aim to provide market participants with flexibility and faster settlement alternatives.

SEBI's proposal envisions the availability of T+0 and Instant Settlement Cycles as optional choices alongside the existing T+1 cycle. This means that market participants can choose the settlement speed that best aligns with their preferences and requirements.

The proposed implementation of T+0 and Instant Settlement will occur in two phases.

In Phase 1, SEBI will introduce the Optional T+0 Settlement Cycle, allowing trades to be settled on the same day if conducted before 1:30 p.m., with settlements finalised by 4:30 p.m.

Phase 2 will introduce Optional Immediate Trade-by-Trade Settlement until 3:30 p.m., offering an even quicker settlement option for participants.

Upon the completion of Phase 2, Phase 1 will be discontinued, signifying a transition towards a faster settlement process overall. As an initial step, the market regulator plans to make T+0 Settlement available for the top 500 listed companies.

This rollout will be executed in three tranches—initially covering 200 companies, followed by another 200, and finally the remaining 100. In essence, SEBI's proposal seeks to enhance the efficiency of the stock market by introducing optional settlement cycles that cater to diverse needs.