The stock market regulator SEBI has taken a big decision. Now the trading in shares will be settled in 1 day itself. It is introduced as SEBI T+1 (Trade+1 Day). This rule will be applicable from January 2022. However, this settlement plan is optional. Traders can choose it if they want.
T+2 settlement cycle is going on in the country since April 2003. Before that T+3 settlement cycle was going on in the country. All stock settlements in India are currently done on a two working days (T+2) basis after the trading day. When you sell shares, that share gets blocked immediately and you get the money after two days. But you will get this money now in a single day.
As per the new SEBI circular, any stock exchange can opt for a T+1 settlement cycle for any share for all the shareholders. However, to change the settlement cycle, at least one month's notice has to be given. SEBI has also said that once the stock exchange opts for the T+1 settlement cycle for any stock, it will have to continue for at least 6 months.
SEBI has said that if the stock exchange wants to opt for the T+2 settlement cycle in between, it will have to give notice one month in advance. SEBI has made it clear that there will be no distinction between T+1 and T+2. This will be applicable to all transactions taking place on the stock exchange.
In early August 2021, SEBI had constituted a panel of experts. In this, the report was to be presented on the difficulties of the process of replacing the existing T+2 cycle with the T+1 cycle. SEBI said in the circular that this decision has been taken after consultation with market infrastructure institutions such as stock exchanges, clearing corporations, and depositors. As per the judgment, the stock exchange will have the flexibility to offer either T+1 or T+2 settlement cycle.
Several applications had come to SEBI seeking to shorten the settlement cycle. Based on this, a new rule of SEBI has been prepared. SEBI has also said that no meeting will be allowed between T+1 and T+2 settlement. SEBI said stock exchanges, clearing corporations, and depositors have been directed to take necessary steps to put in place proper systems and procedures for smooth implementation of the T+1 settlement cycle on an alternate basis. This includes necessary changes in the relevant bylaws, rules, and regulations.
Stock traders said a shorter settlement cycle would be more convenient as it would accelerate the movement of money. Members of the Association of National Exchanges had raised concerns about the T+1 settlement system last month. Several foreign brokerages also told SEBI that T+1 should not be implemented without addressing the operational and technical issues.
The Asia Securities Industry and Financial Markets Association expressed concern over the T+1 settlement cycle, saying it would make India a pre-funding market for global institutional investors, especially those from the US and Europe.
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