Sebi lays guidelines for beta version of T+0 trade settlement cycle

Capital markets regulator Sebi on Thursday put in place a framework to introduce the beta version of the T+0 trade settlement cycle on an optional basis.

To begin with, this option will be available for a limited set of 25 scrips and with a limited number of brokers.

This will be in addition to the existing T+1 settlement cycle in the equity cash market.

The new framework will come into force with effect from March 28, the Securities and Exchange Board of India (Sebi) said in a circular.

"Pursuant to deliberations and approval of the Board, it has been decided to put in place a framework for the introduction of the Beta version of the T+0 settlement cycle on an optional basis in addition to the existing T+1 settlement cycle in the equity cash market, for a limited set of 25 scrips and with a limited number of brokers," Sebi said.

It further said that a shortened settlement cycle will bring cost and time efficiency, transparency in charges to investors and strengthen risk management at clearing corporations and the overall securities market ecosystem.

T+0 would mean settlements on the same day.

Sebi, in its effort to keep pace with the changing times and carry out its mandate of development of securities markets and investor protection, shortened the settlement cycle to T+3 from T+5 in 2002 and subsequently to T+2 in 2003.

With regards to eligibility, the regulator said that all investors will be eligible to participate in the T+0 settlement cycle if they are able to meet the timelines, process and risk requirements as prescribed by the market infrastructure institutions.

Trade timing will be between 9.15 am and 1.30 pm.

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The price in the T+0 segment will operate with a price band of +100 basis points from the price in the regular T+1 market. This band will be re-calibrated after every 50 basis points movement in the underlying T+1 market.

The surveillance measures as applicable in the T+1 settlement cycle shall be applicable to scrips in the T+0 settlement cycle.

The regulator said that T+0 prices will not be considered in index calculation and settlement price computation. There will be no separate close price for securities based on trading in the T+0 segment.

To ensure smooth implementation, the Market Infrastructure Institutions (MIIs) will publish other operational guidelines, including mechanism for trading, clearing and settlement, risk management etc and Frequently Asked Questions (FAQs) along with the list of 25 scrips for the Beta version of T+0 settlement cycle and disseminate the same on their respective websites.