SEBI may defer T+1 Settlement timeline from Jan 1 to Feb 25

The Securities and Exchange Board of India (SEBI) may defer timeline to implement Trade+1 (T+1) settlement from January 1, 2022 to February 25, 2022, sources familiar with the matter told Zee Business. Sebi is in discussion to implement T+1 settlement cycle in staggered manner. It plans to start the new cycle with only 100 companies with the lowest market capitalisation.  

A source close to the development told Zee Business, “Sebi met with Stock Exchanges, clearing corporations and depositaries on Friday and discussed the road map for implementation of T+1”.  

See Zee Business Live TV Streaming Below:

Sebi may start T+1 in a phased manner from February 25. A source in the know of the matter also told Zee Business that "Sebi along with exchanges, clearing corporations and depositaries may start first with bottom 100 companies in terms of market capitalisation.”  

Another source told Zee Business, “In T+1, exchange and clearing corporations may start with bottom 500 companies from last Friday of March. Similarly, it may review on last Friday of every month”.  

Source further said that the market capitalisation of bottom 500 companies may be reviewed every month and stocks reshuffled on the basis of market capitalisation.  

Earlier on September 7,2021, the Sebi has issued a circular about timeline of implementation of T+1 cycle from January 1. However, it is learnt that domestic custodian of foreign portfolio investors requested the capital market regulator and finance ministry to defer the timeline.  

Asia Securities Industry and Financial Markets Association (ASIFMA) wrote an open letter to Sebi chairman Ajay Tyagi and explained the problem.  

The letter was written representing foreign portfolio investors (FPIs) from around the world whose investments account for US$655 billion or roughly 20% of India’s market capitalization.  

Letter added that “Migration to a T+1 settlement would require changes that are significantly more complex and costly (as supported by research conducted by the Boston Consulting Group in 2012 and by the World Bank specifically on India in 2013), requiring among other things end-to-end process redesign and substantial technology investments and enhancements to support near real-time processing capabilities and necessitating an extended migration timeline.” 

ASIFMA said that “This is particularly true for overseas investors (such as those based in the U.S. and Europe) investing into a local market (such as India) due to time zone differences and the involvement of multiple parties (such global and local custodians, FX banks and brokers) in different jurisdictions. We know that at least 64% of the FPIs investing into the India market are from non-Asia jurisdictions, which means that they are even more affected by a shortened settlement cycle in India.”