SEBI Plans T+0 and Instantaneous Settlement Trades by 2025
Introduction
The Securities and Exchange Board of India (SEBI) is taking significant steps towards introducing faster settlement options for trades in the Indian market. SEBI Chief Madhabi Puri recently announced that the regulatory body is working on a roadmap for the implementation of T+0 settlement trades by March 2024, followed by an optional parallel system for instantaneous settlement by 2025.
Importance of Immediate Settlement
During a press conference in Mumbai after the SEBI Board meeting, Puri acknowledged the pressing need for a technological pathway that enables immediate settlement of trades. Market infrastructure and brokers have emphasized the importance of avoiding any interim delays and instead transitioning directly from T+0 settlement to instantaneous settlement. Puri highlighted that this parallel system would be entirely optional for market participants.
Timelines and Roadmap
Puri provided insights into the timeline for the implementation of T+0 and instantaneous settlement. According to feedback from market participants, the plan is to start with T+0 settlement by the end of March, followed by the introduction of instantaneous settlement a year later. The progress made so far in discussions and roadmap development is significant, indicating that SEBI is committed to streamlining settlement processes in the Indian market.
Current Settlement System
India recently adopted a T+1 settlement system, ensuring that trades are settled on the subsequent business day. However, SEBI’s proposal to further expedite settlement faced resistance from offshore investors. Concerns were raised regarding the potential fragmentation of the system and the associated increase in trading costs.
Challenges for Foreign Investors
To execute and settle a trade within the same day, foreign investors currently need to convert their funds into Indian rupees one day before the trade. This requirement poses a challenge for foreign investors, as the existing T+1 and T+2 settlement systems allow rupee acquisition on the day of settlement. The introduction of T+0 and instantaneous settlement systems would address this challenge and provide foreign investors with more flexibility.
Refusal to Approve New Delisting Regulations
In addition to the developments on settlement trades, SEBI also made headlines when it refused to approve new delisting regulations due to insufficient data availability. The regulatory body is ensuring thorough analysis and robust investigation before implementing any changes in delisting regulations.
Conclusion
SEBI’s plan to introduce T+0 settlement trades by March 2024 and instantaneous settlement trades by 2025 is a significant milestone for the Indian market. This move aims to enhance efficiency, reduce delays, and provide investors with faster settlement options. By addressing the concerns raised by market participants, SEBI is taking concerted efforts to streamline settlement processes and make the Indian market more accessible and investor-friendly.
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