On December 10 2024, the Securities and Exchange Board of India (SEBI) issued a circular in exercise of powers given under Section (11) of the SEBI Act, 1992, read with Regulation 51 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, Section 26 (3) of the Depositories Act, 1996 and Regulation 97 of SEBI (Depositories and Participants) Regulations, 2018 which empowers the SEBI to protect investor interests, regulate the securities market, and promote its development.
- Through this circular, SEBI has decided to expand the scope of optional T+0 rolling settlement cycle in the equity cash market.
- As per SEBI’s directions, optional T+0 settlement cycle will be made available to top 500 scrips in terms of market capitalization as on December 31, 2024.
- All the provisions related to the availability of eligible scrips will come into effect from January 31 2025, while provisions related to Qualified Stock Brokers (QSBs), custodians and block window mechanism will be applicable from May 1 2025.
Note: At present, the ‘T+0’ settlement cycle is available for 25 select stocks that include State Bank of India (SBI), Oil and Natural Gas Corporation (ONGC) and Bajaj Auto. This mechanism was 1st started in March 2024.
Key Points:
i.For the initial phase, the eligible scrips will be made available for ‘T+0’ settlement starting with scrips at bottom 100 companies every month till top 500 companies are available for trading.
ii.SEBI has allowed all stock brokers to participate in optional T+0 settlement cycles and they are further permitted to charge differential brokerage for T+0 and T+1 settlement cycles, within the regulatory limit.
iii.Stock Exchanges will introduce a mechanism for Block Deal window under the optional ‘T+0’ settlement cycle, this mechanism will be available only for the morning session during 8:45 am to 9:00 am.
- Currently, for the ‘T+1’ settlement cycle, the Block Deal window is available from 8:45 am to 9:00 am and 2:05 pm to 2:20 pm.
iv.As per the SEBI’s guidelines, the stock exchanges, clearing corporations and depositories (collectively referred as Market Infrastructure Institutions (MIIs) are required to introduce the necessary systems and processes for the seamless participation of institutional investors in the optional ‘T+0’ settlement cycle.
v.SEBI has mandated the MIIs to publish the operational guidelines, including mechanism for trading, clearing and settlement, risk management, among others and Frequently Asked Questions (FAQs) along with the list of eligible scrips and list of QSBs for the optional ‘T+0’ settlement cycle.
vi.SEBI has directed the QSBs with a minimum number of active clients as of December 31, 2024 to put in place systems so that their clients can also participate in the ‘T+0’ settlement cycle.
- SEBI has given a 3 months time period to new QSBs to put in systems compliant with the ‘T+0’ process.
What is T+0 settlement?
T+0 settlement is a process in which transactions are settled on the same day as the trade date, without any delay.
- This means shares are transferred to the account of the buyer and the money is transferred to the account of seller on the same day of the trade.
Recent Related News:
On November 28 2024, SEBI issued a circular under Section (11) of the SEBI Act, 1992, which empowers the SEBI to protect investor interests, regulate the securities market, and promote its development.
- Through this circular, SEBI has outlined a comprehensive Business Continuity Plan (BCP) for interoperability of stock exchanges and clearing corporations to address the issue of trading outages or glitches.
- The interoperability for cash, derivatives, and interest rate derivatives will come into effect from April 1, 2025.
