T+0 Settlement Cycle

The Securities and Exchange Board of India (SEBI) has proposed the introduction of a T+0 facility for clearing and settlement of funds and securities.

T+0 settlement cycle facilitates for clearing and settlement of funds and securities on T+o (same day) and instant settlement cycle on an optional basis.
The facility will be in addition to the existing T+1 (trade plus one day) settlement cycle in the secondary markets for the equity cash segment.

SEBI has shortened the settlement cycle to T+3 from T+5 in 2002 and subsequently to T+2 in 2003.

Phases - SEBI proposed to implement the system in two phases:
1. Phase 1 – T+0 Settlement Cycle
2. Phase 2 – Instant Settlement Cycle
In Phase 1, an optional T+0 settlement cycle (for trades till 1:30 PM) is envisaged, with settlement of funds and securities to be completed on the same day by 4:30 PM.
In Phase 2, an optional immediate trade-by-trade settlement (funds and securities) may be carried out.
In the second phase, trading will be carried out till 3.30 pm.
SEBI has suggested that to begin with, T+0 settlement shall be made available in the top 500 listed equity shares based on the market capitalisation.
The surveillance measures applicable in the T+1 settlement cycle will also apply to securities in the T+0 settlement cycle.
Securities under the trade-for-trade settlement will not be permitted for T+0.
Benefits for clients - Provides flexibility in terms of faster payout of the funds against the securities to the sellers and faster payout of securities against the funds to the buyers.
Benefits for securities market - Provides flexibility in terms of faster payout of the funds against the securities to the sellers and faster payout of securities against the funds to the buyers.

T+1 Settlement Cycle

In T+1, settlement of trade takes place in one working day and the investor will get the money on the following day.
In T+2, settlement of trade takes place in two working days. The broker who handles the trade will get the money on 2nd day, but will credit the amount in the investor’s account only on 3rd day.
If a stock exchange opts for T+1 settlement cycle, it has to mandatorily continue with it for a minimum 6 months.
Thereafter, if it intends to switch back to T+2, it can do so by giving one month’s advance notice to the market.

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