SEBI has sought comments and inputs from stakeholders on introducing the facility for clearing and settlement of funds and securities on T+0 and immediate settlement cycle on an optional basis in addition to the existing T+1 settlement cycle in secondary markets for the equity cash segment. .
Over the past few years, the Indian securities markets have seen tremendous growth, both in terms of volumes, value, and also number of participants. This increase in participation of new investors in securities market places greater onus on SEBI to make markets more efficient and safer for its participants, with a special focus on retail participants, said a SEBI consultation paper.
SEBI, in its effort to keep pace with the changing times and fulfill its mandate of development of securities markets and protection of investors, shortened the settlement cycle to T+3 from T+5 in 2002 and then to T+2 in 2003. Further in 2021, T+1 settlement was introduced in a phased manner which was fully implemented from January 2023.
It is observed that a high percentage of retail investors bring upfront funds and securities before placing the order. For the period June 2023, for about 94% of transfer based trades with value up to Rs 1, 00,000 per transaction, investors paid funds and securities early.
An immediate settlement mechanism enables immediate receipt of funds and securities, as opposed to an existing payout on T+1 day, eliminates the risk of settlement shortage, as both funds and securities will be required to be available before placing the order.
This also removes the risk for market participants and reduces the risk of Clearing Corporations (CCs). Enhances investor protection by improving the investor’s control over the securities and funds, as funds and securities would be credited into the customers’ account directly for those who trade with blocked amount using UPI facility (UPI customers).