MONEY

SEBI offers stock exchanges an option to switch to T+1 settlement cycle

The Securities and Exchange Board of India (SEBI) on Tuesday introduced T+1 settlement cycle for completion of share transactions on an optional basis in a move to enhance market liquidity. 


Currently, trades on the Indian stock exchanges are settled in two working days after the transaction is done (T+2). The Capital markets regulator has decided to provide flexibility to stock exchanges to offer either T+1 or T+2 settlement cycle for completion of share transactions, according to a circular. 


The stock exchange may choose to offer T+1 settlement cycle on any of the scrips, after giving an advance notice of at least one month, regarding change in the settlement cycle to all stakeholders, including the public at large, and also disseminating the same on its website, the SEBI has said. 


After opting for T+1 settlement cycle for a scrip, the stock exchange will have to mandatorily continue with the same for a minimum period of six months. Thereafter, in case the stock exchange intends to switch back to T+2 settlement cycle, it can do so by giving a one-month advance notice to the market. Any subsequent switch from T+1 to T+2 or vice versa will be subject to minimum period and notice period as mentioned by the regulator. 


The decision has been taken based on discussions with market infrastructure institutions, like stock exchanges, clearing corporations and depositories. “There shall be no netting between T+1 and T+2 settlements,” the SEBI said. 


The settlement option for security will be applicable to all types of transactions in the security on that stock exchange. For example, if a security is placed under T+1 settlement on a stock exchange, the regular market deals as well as block deals will follow the T+1 settlement cycle on that bourse. 


The new framework would come into force with effect from January 1, 2022, the regulator said. 

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