SEBI introduces T+1 settlement cycle for stocks on optional basis – Moneycontrol

The Securities and Exchange Board of India (SEBI) on September 7 introduced T+1 (Trade plus 1 day) rolling settlement cycle for stocks on an optional basis. The new rule will come into force on January 1, 2022.

The regulatory change has been adopted after the market regulator received requests from various stakeholders to further shorten the settlement cycle.

“Based on discussions with Market Infrastructure Institutions (Stock Exchanges, Clearing Corporations and Depositories), it has been decided to provide flexibility to Stock Exchanges to offer either T+1 or T+2 settlement cycle,” SEBI in its circular said.

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According to the latest circular, a stock exchange can choose to offer T+1 settlement cycle on any of the scrips to all stakeholders — including the public at large — after giving advance notice of at least one month regarding the change in the settlement cycle.

SEBI further noted that a stock exchange will have to mandatorily continue with the same for a minimum period of six months after opting for T+1 settlement cycle for a scrip. In case the stock exchange wishes to switch back to T+2 settlement cycle, it will have to give one-month notice to the market.

However, SEBI made it clear that there will be no netting between T+1 and T+2 settlements. The settlement option for security will be applicable to all types of transactions in the security on that stock exchange, the circular noted.

Earlier in August 2021, SEBI had set up a panel of experts to look into the concerns that could hinder the process of shifting the country’s trade settlement to T+1 (Trade plus 1 day) from the current T+2.

At present, trades are settled two working days after the transaction is done. India moved to the T+2 settlement cycle from the T+3 cycle in April 2003.