The Indian Stock Market, a dynamic arena where fortunes are made and lost in the blink of an eye, is on the cusp of an another transformation. As investors navigate through the intricate web of financial transactions, a new T+0 Trade Settlement.
Regulatory authorities have announced plans to implement the T+0 Trade Settlement system, a move poised to redefine stock trading in India. Stock exchanges are initiating the beta version of same-day transaction settlement (T+0) for specific cash segment stocks, signaling a change from the traditional T+1 cycle, with the rollout commencing today, Thursday, March 28th.
What is T+0 Trade Settlement?
India, having recently transitioned to a T+1 settlement cycle, has now introduced a pilot project for same-day share settlement, termed T+0, as of March 28, 2024.
Unlike the conventional T+1 cycle, where trades are settled the next day, the T+0 system ensures that shares are transferred to the buyer's account and funds are deposited in the seller's account on the same day of the trade.
For instance, if a share is bought on a Monday, it will be credited into the buyer's demat account on that same Monday. This stands in contrast to the previous T+1 cycle, where settlements occurred the following day.
With this latest settlement cycle, investors can expect to receive shares in their demat accounts on the same day of the transaction, enhancing efficiency and streamlining the trading process.
Co-Existence with T+1 settlement
Initially introduced in a beta mode, the T+0 system will run alongside the existing T+1 settlement cycle. This means investors have the option to choose between the two settlement timelines.
Trading Sessions and Brokers
Trading sessions for T+0 stocks are set between 9:15 AM to 1:30 PM. Additionally, only a limited number of brokers are authorized to offer this facility at present.
The implementation of the T+0 settlement cycle will be in two distinct phases. During Phase 1, trades executed before 1:30 pm will be considered for settlement, which must be completed by 4:30 pm.
Following this, Phase 2 will commence with trading sessions from 1:30 pm to 3:30 pm, replacing the initial phase. This sequential approach aims to optimise transaction efficiency while accommodating varying market dynamics.
Limited Availability and Stocks
The same-day settlement is currently available for a selected group of stocks, totaling 25 companies.
On Thursday, BSE issued a circular detailing 25 scrips eligible for participation in the T+0 settlement cycle. Among the listed scrips are Bajaj Auto, Vedanta, Hindalco Industries, State Bank of India (SBI), Trent, Tata Communications, Nestle India, Cipla, MRF, JSW Steel, BPCL, ONGC, NMDC, and Ambuja Cements.
The NSE's T+0 settlement cycle includes 25 stocks, with eligibility extending to State Bank of India (SBI), MRF, Hindalco, and Vedanta. Among the other eligible stocks are Ambuja Cements, Ashok Leyland, Bajaj Auto, Bank of Baroda, Bharat Petroleum Corporation Ltd (BPCL), Birlasoft, Cipla, Coforge, Divi's Laboratories, Hindalco Industries, Indian Hotels Company Ltd, JSW Steel, LIC Housing Finance, LTIMindtree, Samvardhana Motherson International, Nestle India, NMDC, Oil and Natural Gas Corporation (ONGC), Petronet LNG, Tata Communications, Trent, Union Bank of India, and Vedanta.
Trade Settlement in other countries
India's adoption of the T+0 share settlement system places it among a select group of countries with short settlement cycles. This move follows India's transition to the T+1 settlement system in September 2023. Across Asia, China stands alongside India in offering a T+0 settlement cycle, while the majority of other markets maintain a T+2 settlement mode.
In the United States, a shift to the T+1 settlement cycle is scheduled for May 28th, aligning with India's recent reforms. Meanwhile, the European Union is anticipated to follow suit, potentially signaling a broader global trend towards shorter trade settlement cycles.
