Settlement cycles, Stock market settlement cycle changes from 27 january 2023 because of new peak margin penalty and online trading transactions. Current stock was in T+2 cycle.
The Indian equity market will completely shift to a shorter trading cycle called, T+1 settlement, on January 27. This will allow buyers and sellers to get shares and money in their accounts one day after the trade ends.
The T+1 settlement system will give investors the option to trade more by rolling the funds and shares faster. The settlement cycle is said to be completed only when the buyer receives the shares and the seller receives the money.
In India, the settlement process is based on the rolling settlement principle of T+2 as of now. Reducing the settlement cycle further to T+1 will enhance market liquidity.
November 8, 2021, the stock exchanges informed that it will implement T+1 settlement cycle in a phased manner, starting with the bottom 100 stocks in terms of market value, from February 25, 2022. Thereafter, 500 more stocks will be added based on the same criteria of market value from the last Friday of March 2022 and every following month thereafter.
Those transacting in stocks falling under T+1 settlement cycle will get their money or shares delivered in less than 24 hours.
On January 27, all the large-cap and blue-chip stocks will move to the T+1 system. Indicating the completion of the move, on Friday, a circular from the NSE said that there would be no further circulars from the bourse regarding the list of securities shifting to T+1 settlement.
After the new rule, if an investor buys 50 shares on Monday, these will be received in their Demat account on Tuesday.
“This will make India the first country in the world to go for such a quick settlement putting us ahead of the US. The T+1 settlement was proposed recently with implementation timelines of 24 months by the Securities Exchange Commission (SEC),” Manoj Dalmia Founder and Director, Proficient Equities Limited, told Moneycontrol.
Settlement Cycles, Can exchanges go back to T+2 settlement?
After opting for the T+1 settlement cycle for a scrip, stock exchanges have to continue with the same for a minimum of six months. After that, the stock can be moved back to the T+2 settlement cycle by giving a month’s notice to the market.
Which other markets operate on T+1?
China is the only market of significant size and scale which operates on a shortened settlement cycle (T0/T+1). The US market is also in the process of moving to T+1 in the coming months.