The Securities and Exchange Board of India has announced a framework for the T+0 settlement cycle from March 28. T+0 settlement is the process of settling trades on the same day, which means that the seller of stocks will receive money on the day of sale, unlike T+1.
At present, the Indian securities markets operate on a T+1 settlement cycle, where the settlement happens on the next day of trade.
SEBI has progressively reduced the time consumed in trade settlement in last 2 decades. In 2002, the regulator cut down the settlement period from T+5 to T+3, and in 2003, SEBI further reduced it to T+2.
In 2021, the T+1 settlement started and was gradually implemented, with the final phase completed in January 27 2023.
T+0 settlement provides numerous benefits such as increases liquidity in the market by freeing up margins and increases the trade as money is availabe immediately for the purchase of new stocks
However it could adversely affect brokers whose business model is dependent on interest income from client funds.
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