On Dec. 22, IND SEBI proposed T+0, instant settlement options.
IND SEBI sought feedback on Introduction of optional T+0 and optional instant settlement of trades in addition to T+1 settlement cycle in Indian securities markets.
IND SEBI has progressively reduced settlement cycles to adapt to market changes.
Overview of Proposal
Majority of retail investors already provide funds and securities upfront; instant settlement offers immediate receipt of funds, securities, enhancing investor protection.
Benefits include faster pay-outs, improved control for investors, also enhanced market efficiency by freeing up capital, and risk management for clearing corporations.
Potential concerns include liquidity fragmentation between T+0/instant settlement and T+1 settlement, increased trading costs, price divergence, and higher impact costs.
Mitigation strategies involve arbitrage, early pay-ins, and introducing price bands.
Effectiveness
The consultation is open until Jan. 12, 2024.
Mar. 2024 Beta Version
On Mar. 21, 2024, IND SEBI issued circular introducing a beta version of optional T+0 rolling settlement cycle, in addition to existing T+1 settlement in equity cash markets.
Follows Mar. 15, 2024, SEBI board approve launch of beta version for/with a limited set of scrips and brokers; to review progress before deciding further action, #205051.
Includes operational guidelines covering eligible investors, surveillance measures, trade timings, price band, index calculation, settlement price computation, netting.
Stock exchanges, clearing corporations, depositories (collectively market infrastructure institutions (MIIs)) are instructed to disseminate list of participating brokers, scrips.
MIIs to publish further operational guidelines and FAQs, provide a fortnightly report on progress of activities, and put in place measures necessary to implement the above.
Paragraph 10 of the circular states it comes into force with effect from Mar. 28, 2024.
On the same day, IND CDSL issued its operational guidelines, requesting participants disseminate details to clients and initiate any necessary back-office related changes.
Mar. 22, 2024 IND ICCL Operational Guidelines
On Mar. 22, 2024, IND ICCL announced implementation of T+0 beta version, effective Mar. 28, 2024 and published FAQs, operational guidelines as required by SEBI.
On the same day, IND NSD published its operational guidelines in compliance with SEBI circular, to be implemented in NSDL depository system at end of Mar. 27, 2024.
IND NSE also published its operational guidelines, FAQs re beta version introduction.
Mar. 28, 2024 IND ICCL Launched Beta
On Mar. 28, 2024, IND ICCL launched beta version of T+0 settlement on Mar. 28.
T+0 settlement allows trades to be settled on same day they are executed, reducing time lag risks; to facilitate quicker receipt of funds and securities in investor accounts.
Apr. 2024 Addition of Market Type
On Apr. 1, 2024, IND ICCL issued an additional market type for T+0 settlement.
New market type codes 55 and 45 have been added in SPEED-e, and the deadline time for pay-in of securities for T+0 settlement of IND NSE and IND BSE are specified.
Participants must ensure that all the instructions submitted by the clients and clearing members are duly executed in the eDPM well before the IND NSD deadline time.
On Jul. 31, 2024, IND ICCL issued notice on introduction of custodial participant code in T+0 settlement cycle, in addition to T+1 settlement cycle in equity cash segment.
Pursuant to IND NSE's circular on custodial participant (CP) code in T+0 same day.
IND ICCL confirms facilitation of CP code trades in T+0 settlement cycle from Sep. 30, 2024; INST continues to be out of scope for T+0 settlement mechanism.
Clearing corporations are instructed to build in the family CP code mechanism; early pay-in of securities using block mechanism shall be mandatory for delivery in the T+0 segment for UPI clients and all non-custodian clients, using the new settlement type.
IND ICCL shall match early pay-in (EPI) against actual sale obligations and reverse excess EPI; custodians will deliver securities to clearing corporations (CCs) using depositories' existing mechanism; securities must be delivered to CC's account.
When trades are rejected by custodians, members shall provide manual pay-in instructions for incremental security delivery pay-in obligation; all existing reports re T+0 settlement mechanism shall be enhanced to include custodial participant trades.
Operational modalities for T+0 settlement shall be provided in a subsequent circular.
IND SEBI clarified on report regarding T+0 settlement cycle on the same day.
SEBI report dated Jul. 30, shared potential benefits if application supported by blocked amount (ASBA) for secondary market was to be adopted by retail investors.
IND SEBI might make a proposal to make it mandatory for the qualified stock brokers to offer ASBA as an option to their clients; however, IND SEBI emphasized that the option as to whether to use ASBA for their trading shall still remain with the clients.
Sep. 2024 IND CDSL T+0 Rolling Settlement
On Sep. 19, 2024, IND CDSL reminded depository participants (DPs) on operational guidelines applicable to custodial clients participating in T+0 rolling settlements.
Custodial clients participating in T+0 rolling settlement can execute early pay-in (EP) transactions until 1:45pm and must use a valid CP Code and CMID combination.
Plus, perform intra, inter-depository on-market transactions within T+0 cycle until pay-in cut-off time, with securities processed based on auto delivery order from CCs.
For trade not confirmed/rejected by custodian, executing member assumes obligation, rejected trades must be settled by normal pay-in/inter-depository instructions.
For non-custodial clients, the existing T+0 settlement mechanism remains unchanged, which requires EP by 1:45pm; and other pay-in modes shall not be considered.
Sep. 26, 2024 IND NSE Notice
On Sep. 26, 2024, IND NSE said revised implementation date for custodian clients' participation in the optional T+0 settlement cycle will be communicated in due course.
Document dated Sep. 26, 2024, was received on Sep. 27 due to a fixed feed.
Dec. 2024 Enhancement
On Dec. 10, 2024, IND SEBI said all stock brokers can participate in the optional T+0 settlement cycle, may charge different brokerage rates for T+0 and T+1 settlements.
Qualified stock brokers (QSBs) are required to implement systems and processes to enable investor participation in T+0 cycle, with grace period of 3 months for new QSBs.
Custodians, MIIs must establish systems to facilitate institutional investor participation.
New block deal window for the T+0 settlement cycle will operate exclusively during the morning session, from 8:45 to 9am, alongside the existing windows for T+1.
MIIs have to update bye-laws, regulations, disseminate information to participants
Provisions come into effect in two phases: Jan. 31, 2025, for expanded scrips and broker participation, and May 1, 2025, for QSBs, custodians, and block deal windows.
Regulators
IND CDSL; IND ICCL; IND NSD; IND NSE; IND SEBI
Entity Types
B/D; Depo; IA; Inv Co
Reference
Cir SEBI/HO/MRD/POD-3/P/CIR/2024/172, 12/10/2024; Cir NCL/CMPT/64202, 179/2024, 9/26/2024; Com CDSL/OPS/DP/SETT/2024/549, 9/19/2024; PR 15/2024, Nt 20240731-47, 20240731-11, 7/31/2024; Cir NSDL//SPEED-e/POLICY/2024/0005, 4/1/2024; PR 3/28/2024; Cir NCL/CMPT/61301, 0056/2024, NSDL/POLICY/2024/0039, Nt 20240322-51, FAQ, 3/22/2024; Comm CDSL/OPS/DP/SETT/2024/164, Cir SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/20, 3/21/2024; CP 12/22/2023; Cycle
