Sebi aims to introduce same-day settlement of trades by March 2024

The Securities and Exchange Board of India (Sebi) is aiming to introduce same-day settlement of trades on stock exchanges by March 2024 and eventually have real-time settlement, its Chairperson Madhabi Puri Buch said on Saturday.

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Reducing Settlement Timelines

The watchdog has already reduced the settlement timelines to as short as one day. Sebi wants the T+0 (same-day settlement) norm to be in place from March-end 2024 and T+ instantaneous settlement 12 months from thereon, Buch told reporters here after the regulator's board meeting.

Market Makers' Suggestions

According to Buch, market makers are of the view that it makes better sense to move directly from T+1 hour to T+instantaneous as there is no benefit to be drawn from the middle ground which is T+0. The investment banker-turned-regulator said that Sebi is fully open to the suggestions made by the market makers on the instantaneous settlement of trades.

Optional New Settlement System

Buch said that the new settlement system will be parallel to the existing settlement system and will be fully optional. Moreover, it will be available on select large products, and even that will be optional to choose from.

Moving from T+2 to T+1

India's stock markets moved to T+1 settlement, where trades are settled the next business day, in January this year. Earlier, it was a T+2 system. The changes from T+2 to T+1 and T+1 hour have been eventless from an infrastructure point of view, she added.

Success of ASBA

Sebi's plans hinge on the success of the newly introduced Application Supported by the Locked Amount (ASBA) for secondary market transactions.

Addressing Concerns

Earlier, concerns were raised by certain foreign portfolio investors on the shortening of the settlement cycles citing forex-related worries. In July, the chairperson announced that Sebi was aiming to introduce instantaneous settlement of trades on the stock exchanges by the next fiscal.

One-Hour Trade Settlements

Later, in September, a Sebi official said the regulator will introduce one-hour trade settlements by the end of this fiscal, in the run-up to making such processes instantaneous.

The introduction of same-day settlement and instantaneous settlement of trades is a significant step towards making the Indian stock market more efficient and in line with global standards.