SEBI To Introduce One-hour Trade Settlements by March: Madhabi Puri Buch

Moneylife Digital Team 07 September 2023

Investor Interest

India is the first country globally to move towards a trading+1 (T+1) settlement cycle from the existing T+2 for all scrips. It will be followed up by a one-hour settlement of trades by March, which would be a stepping-stone for instantaneous settlement in the stock markets, says Madhabi Puri Buch, chairperson of SEBI.

Speaking at the Global Fintech Fest, the SEBI chief says the application supported by blocked amount (ASBA)-like facility for secondary markets will start by January for all investors, and it will take another couple of months for the one-hour cycle to set in by March next year. The next step will be instantaneous settlement.

However, she clarified that the facility for early settlement will be optional, and investors can decide if they want it.

In the T+1 settlement cycle, liquidity becomes available in two working days. With the hourly settlement, this cycle will be further crunched, making stock market investments even more attractive. In addition, the change will also free up a significant chunk of margin money that brokers maintain with the clearing corporation.

However, key market participants, such as brokers, clearing corporations, depository institutions, and fund houses, must modify their systems to hourly processing from an end-of-day batch processing mode for regulatory reporting obligations.

Commenting on the issues related to brokers, the SEBI chief says they are working on a mechanism through which, if a broker goes down, all his clients will have direct access to the exchange. "Investors will be able to manage risk reduction and to close their positions (in such case),"

Earlier in July, Ms Puri Buch said the market regulator is working to bring the T+1 settlement as available for buying stocks in the cash market, for redemption and allotment of mutual fund (MF) units.

"SEBI is working on instantaneous settlement in the stock market, which can happen with the unified payments interface (UPI) infrastructure. Even Intraday settlements are possible in the cash equity segment," she had said.

She also spoke about the need to lower timelines for MF redemption and allotment to T+1 from existing T+2. According to the SEBI chairperson, in an analysis of redemptions worth Rs24 lakh crore from equity and hybrid schemes, investors have gained Rs230 core through reduced timelines. (Read: SEBI for Instant Settlement in Stock Market, Plans To Bring T+1 Redemption and Allotment for MF: Madhabi Puri Buch)

Comments

User

Smasher

2 years ago

Will instant settlement end day trading, scalping, arbitrage trades etc. What will be the effect of it on volume and liquidity of the market? Has anyone bothered to consider the drawbacks and risks of this process?