BSE, NSE to roll out shorter settlement cycle or T+1 regime from today

Stock exchanges BSE and NSE will roll out shorter settlement cycle or T+1 regime from Friday, a move that will help reduce margin requirement for clients and boost retail investment in equity markets.

T+1 (trade plus one) means that market trade-related settlements will need to be cleared within one day of the actual transactions taking place. Currently, trades on the Indian stock exchanges are settled in two working days after the transaction is done (T+2).

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The stock exchanges NSE and BSE in November in a joint statement announced that they will implement the T+1 settlement cycle in a phased manner starting February 25, with the bottom-100 stocks in terms of market value.

Thereafter, 500 stocks will be added based on the same market value criteria from the last Friday of March and so on every following month.

This is not the first time that markets regulator Sebi has chosen to shorten the settlement cycle. Earlier in 2002, the capital markets regulator had cut the number of days in the settlement cycle from T+5 days to T+3 days, and then in 2003, it was reduced to T+2 days.

Market experts believe that the T+1 settlement system will allow the cycle of money to move faster without waiting for an extra day.

Under the new regime, all listed stocks, across stock exchanges (BSE, NSE and MSEI) will be ranked in descending order based on daily market capitalisation averaged for October 2021.

Where a stock is listed on multiple exchanges, the market capitalisation will be calculated based on the price of stock at the stock exchange with highest trading volume during the period under review.

The list of stocks and exchanges where they are available for trading will be published on the website of all exchanges.

Based on the ranking arrived, the bottom-100 stocks will be available for the introduction of T+1 settlement, from February 25, 2022.

Earlier, Sebi chief Ajay Tyagi had said the decision to implement the shorter settlement system in a phased manner beginning February 2022 will go a long way in protecting investors' interest.