Sebi plans to implement optional same-day settlement from March 28

Sebi chief says instantaneous settlement needed to tackle emerging competition from crypto world

The Securities and Exchange Board of India (Sebi) plans to implement a T+0 (same day) settlement cycle for the cash segment from March 28 on an optional basis, while instantaneous settlement will be effective from March 2025, Chairperson Madhabi Puri Buch said on Monday.

The market regulator’s board is scheduled to meet on Friday, where it could approve the framework for same-day settlement of trades.

At present, the Indian market operates on a T+1 (trade-plus-one-day) settlement cycle, even as most global markets settle trades on a T+2 basis. Foreign portfolio investors (FPIs) had earlier submitted concerns to Sebi regarding the fragmentation of liquidity in the market and urged to wait for the United States to move to a T+1 settlement cycle.

The Sebi chief said the regulator had met several FPIs and conducted ‘detailed deliberations’ to help them understand a fresh perspective on the need for instantaneous settlement, beyond the operational challenges.

Buch highlighted challenges emerging from the cryptocurrency market, which operates on tokenisation and instant settlements. 

“If our well-regulated market cannot compete with the crypto world and cannot say we also offer you tokenisation and instantaneous settlement, over the medium term, you should expect investors to move to a space where they are now…If they move and liquidity goes away from our market, it is certainly not good for our markets, and our FPIs will not be happy,” said Buch.

Though she clarified that the regulator would “never want any anonymity” in the market but was trying to bring all advantages to compete with a platform based on crypto that may emerge later through a cross-border mechanism.

“If any sizable part of the market migrates there, our market will lose liquidity, which is a terrible outcome for our mutual funds, FPIs, and other retail investors who want to stay in the regulated market. The commercial consideration of everyone in the ecosystem will be compromised,” she said.

The Sebi chairperson had first spelled out the plans for same-day settlement in September last year, which was followed by a consultation paper in December 2023.

In the paper, Sebi had proposed a migration to T+0 in two phases.

In phase 1, an optional T+0 settlement cycle is envisaged for trades till 1:30 pm with the settlement of funds and securities to be completed on the same day by 4:30 pm. In the second phase, an optional immediate trade-by-trade settlement may be carried out for trades till 3:30 pm.