Stock exchanges have introduced a groundbreaking change in the Indian stock market by debuting the T+0 settlement system for select stocks. This new system allows sellers to receive full cash on the transaction day itself, marking a significant departure from the previous T+1 settlement cycle.
Under the traditional T+1 system, sellers would typically receive only 80% of their cash on the day of the sale, with the remaining 20% being withheld until the following day. However, with the implementation of the T+0 settlement system, sellers now have instant access to 100% of their cash on the day of the transaction, providing them with greater liquidity and flexibility.
The T+0 settlement system will be rolled out in two phases. In the first phase, transactions made up to 1:30 pm will be considered for settlement, which must be completed by 4:30 pm. The second phase will see trading taking place from 1:30 pm to 3:30 pm, with the first phase being discontinued.
This move is expected to benefit traders and investors by providing them with immediate liquidity, allowing them to react swiftly to market fluctuations, especially during highly volatile trading sessions. Prashanth Tapse, a Research Analyst at Mehta Equities, highlighted that the introduction of T+0 settlement would revolutionize the trading landscape, particularly for small investors with limited cash reserves.
Initially, the T+0 settlement system will be implemented for 25 select stocks, including prominent names like State Bank of India (SBI), MRF, Hindalco, and Vedanta, among others. Following a review of the system’s progress at three and six-month intervals, the Securities and Exchange Board of India (SEBI) will determine the next steps.
SEBI Chairperson, Madhabi Puri Buch, likened the process of implementing the T+0 settlement system to peeling an onion, stating that it involved extensive problem-solving and personal sacrifices. She emphasized the importance of doing what is right and leaving no stone unturned to achieve success, urging graduates to discover their own mantra for success.
In conclusion, the introduction of the T+0 settlement system represents a significant milestone in India’s capital markets, aiming to enhance investor confidence, streamline trading processes, and foster a more dynamic and competitive market environment. Despite potential technical challenges in the initial stages, stakeholders are optimistic about the long-term benefits of this innovative initiative.
