How Trade Settlement In 1 Hour Will Help Investors Have Faster Cash In Hand?

Market regulator Sebi is looking to launch a one-hour settlement cycle by as early as March 2024, and further to instantaneous settlement by October of the same year. This means that soon, your transactions of buying and selling of equities may not take 1 day to settle but rather just an hour.

On the sidelines of the Global Fintech Fest 2023, Sebi's chief Madhabi Puri Buch told reporters that the technology for implementing the one-hour settlement cycle already exists. Adding she said, the industry is working on a new technology for instantaneous settlement.

Currently, all securities on Indian markets have T+1 settlement. Directed by Sebi, stock exchanges introduced a T+1 settlement cycle from January 01, 2022, on any of the securities available in the equity segment. T+1 settlement cycle was introduced in a phased manner accordingly.

What is the T+1 settlement cycle? For all trades executed on the T day, exchanges determine the provisional cumulative obligations of each member on the T day and electronically transfer the data to Clearing Members (CMs). All trades concluded during a particular trading date are settled on a designated settlement day i.e. T+1 day.

So how would trade settlement in 1 hour help investors?

A Balakrishnan, Executive Director of Geojit Financial Services said, "We do not see any impediment in Sebi's plan to implement one-hour settlement of trades first. It is highly implementable when Clearing Corporations and Depositories are ready with the systems. UPI's success created confidence in near real-time settlement."

Further, Geojit's executive added, "Investors will get faster settlement and they will have faster cash in hand. It is like having an UPI where transactions are settled quickly. It will mark a significant leap in transparency and efficiency in the Indian stock market offering investors real time access to their assets which will further attract resident investors in our stock market."