SEBI’s T+0 Proposal: A Game-Changer for Stock Market Transactions

Recently Capital markets regulator Securities & Exchange Board of India (SEBI)  is proposing to introduce instant settlement in its stock market, making it the first country to do so, with the aim of attracting more investors and promoting rapid growth. The proposed two-phase plan includes t+0 settlement, where trades executed before 1:30 pm will be settled on the same day for the top 500 listed companies. The implementation of instant settlement is expected to benefit investors and potentially impact the settlement cycle of mutual funds as well.

Understanding the Implications of SEBI’s T+0 Proposal

India is introducing instant settlement in its stock market, making it the first country to do so.

• Currently, there is no instant settlement in any stock market around the world.
• Instant settlement means that the money from selling shares will immediately come into the seller’s account.
• India aims to introduce instant settlement as the first step towards this change.

T+1 settlement in the stock market means that the transaction date plus one day for the settlement to take place.

• T+1 settlement allows investors to receive the funds from selling shares the next day.
• Some brokers may show the funds in the demat account, but the transfer to the bank can only happen the next day.
• The t+1 settlement cycle was implemented in India from January this year i.e. 2023, making India the second country after China to have this system.

SEBI’s T+0 proposal will initially start with the top 500 shares of listed companies and gradually be implemented in the entire stock market.

• The top 500 companies in the stock market will be the starting point for the implementation.
• Coordination among exchanges is necessary for the proposal to be successful.
• The proposal aims to align with international practices and promote faster transactions in the Indian stock market.

The implementation of the SEBI T+0 proposal will have a positive impact on investors in the Indian stock market and mutual funds.

• The proposal aims to attract more investors by offering reliability, low cost, and high-speed transactions.
• Investors will benefit from immediate share transfers and quicker settlement in both the stock market and mutual funds.
• The implementation of T+0 settlement in the stock market may also lead to a reduction in settlement time for mutual funds.