Stock Exchanges to Trial T+0 Settlement System for Faster Transactions

Mumbai, 28th March 2024: Starting Thursday, the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are set to introduce changes in the payment system for buying and selling shares. Both exchanges will initiate a trial of the T+0 settlement system with 25 selected stocks, allowing investors to receive payment on the same day they sell their shares.

Currently, the stock market operates on the T+1 settlement system, where payment is made one day after the shares are sold. The Securities and Exchange Board of India (SEBI) released consultation papers for T+0 settlement three months ago, seeking public feedback until January 12. Six days ago, SEBI issued guidelines outlining a six-step process for the transition.

According to SEBI, all investors will be eligible for the T+0 settlement system, which will be implemented in two phases:

First Phase: Shares sold by 1:30 pm on the trading day will be settled by 4:30 pm.

Second Phase: All transactions conducted until 3:30 pm will be settled immediately. Following the commencement of the second phase, the first phase will be discontinued.

Investors stand to benefit from the T+0 settlement system in several ways:

– Funds from selling shares will be credited to investors’ accounts on the same day, allowing them to utilize the money immediately for other purposes.
– Shares purchased will be credited to the demat account on the same day, enabling investors to pledge them promptly if desired. Previously, shares were credited to demat accounts the next day.
– The system will enhance liquidity in the market, enabling investors to purchase additional shares without waiting for the settlement period. It also allows investors to capitalize on market opportunities even with short-term funds.

SEBI Chairperson Madhuri Puri Buch previously mentioned plans to reduce trade settlement time to one hour by March 2024, followed by the immediate implementation of the T+0 settlement system by October 2024.

Before 2002, India operated on a T+5 settlement system, which was reduced to T+3 in 2002 and T+2 in 2003. The T+1 settlement system was introduced in January 2023, facilitating fund and share settlements within 24 hours.