SEBI introduces Beta version of optional T+0 settlement cycle; revolutionizing equity cash markets

T+0 rolling settlement SEBI news: The Securities and Exchange Board of India (SEBI) has introduced the beta version of the T+0 rolling settlement cycle in equity cash markets, providing an optional basis for traders. According to SEBI, this move comes as a progressive step in the evolution of India's securities market infrastructure, leveraging advancements in technology and risk management capabilities.

SEBI's circular on Thursday, communicated this decision to all recognized stock exchanges, clearing corporations, and depositories. The circular highlighted that the T+0 settlement cycle would be introduced on an optional basis alongside the existing T+1 settlement cycle.

The introduction of the T+0 cycle follows the successful implementation of the T+1 settlement cycle phased in from January 27, 2023, as per circular dated September 07, 2021.
This transition was made possible due to the enhanced technological capabilities and robust risk management frameworks of Market Infrastructure Institutions (MIIs), including stock exchanges, clearing corporations, and depositories.

The decision to introduce the T+0 cycle was taken after careful consideration of recommendations from a Working Group comprising MIIs, public comments, and inputs from SEBI's Risk Management Review Committee.

SEBI's Board approved the proposal, leading to the implementation of the beta version of the T+0 settlement cycle, under the operational guidelines outlined in the circular. The T+0 settlement cycle will initially cover a limited set of 25 scrips and involve a restricted number of brokers. All investors meeting the prescribed timelines, processes, and risk requirements are eligible to participate in the T+0 segment.

Surveillance measures applicable in the T+1 settlement cycle will also apply to scrips in the T+0 cycle.

Trading sessions will be continuous from 09:15 AM to 1:30 PM. Price movements in the T+0 segment will operate within a price band of +/- 100 basis points from the regular T+1 market, subject to recalibration. T+0 prices will not influence index calculations or settlement price computations.

Netting of obligations between T+1 and T+0 settlement cycles will not be permitted.
To facilitate a smooth transition, MIIs will publish operational guidelines and FAQs, along with the list of 25 scrips for the beta version of the T+0 settlement cycle, on their respective websites.

They will also periodically update the list of participating brokers and provide fortnightly reports on the progress of activities in the T+0 cycle. The circular, effective from March 28, underscores SEBI's commitment to stakeholder consultation and ongoing efforts to promote investor interests and market development.

MIIs are directed to take necessary steps, including system upgrades and regulatory amendments, to ensure compliance with the new framework. From shortening settlement cycles to T+3 in 2002, then to T+2 in 2003, and the subsequent introduction of T+1 settlement in 2021, SEBI has consistently strived to align India's securities markets with global standards.

The decision to introduce the beta version of T+0 settlement stems from SEBI's recognition of the evolving technological landscape and the robustness of MIIs. With advancements in technology and infrastructure, the ecosystem is now capable of facilitating immediate transfers of securities and real-time fund settlements.

All investors are eligible to participate in the T+0 settlement cycle, provided they meet the prescribed timelines, processes, and risk requirements. Scrutiny measures applicable in T+1 settlement remain applicable in T+0 settlement.

A price band of +-100 basis points from the regular T+1 market price will be in effect, subject to recalibration after every 50 basis points movement. T+0 prices will not influence index calculation or settlement price computation.

No netting of obligations between T+1 and T+0 settlement cycles. The beta version of T+0 settlement will initially cover a limited set of 25 scrips and a select number of brokers. MIIs will publish operational guidelines, FAQs, and the list of eligible scrips on their respective websites. Periodic updates on broker participation and settlement progress will be provided by MIIs.

SEBI underscores its commitment to stakeholder engagement, pledging to continue consultations with market participants. The regulator will review the beta version's progress at three-month and six-month intervals, paving the way for informed decisions on future enhancements.

SEBI's Chairman, Madhabi Puri Buch, has previously articulated the regulator's vision for instantaneous settlement mechanisms. The envisaged instant settlement system aims to empower investors with real-time fund access, further enhancing market efficiency and participant safety. (ANI)