 "sensex, markets")
India's stock exchanges on Thursday launched the same-day transaction settlement (or "T+0") beta version for a select few cash segment stocks.
Market regulator Sebi recently introduced a new settlement cycle for stock trades, called T+0. This means that instead of waiting a day (T+1) for the trade to settle and funds/stocks to be delivered, everything gets settled on the same day (T+0) of the trade.
T+0 is currently in a beta phase. This means it's only being implemented for a limited number of stocks (around 25) and with a select group of brokers. The pilot programme is designed to assess the effectiveness and iron out any potential issues before a wider rollout.After evaluating the results at the three- and six-month marks, capital market regulator SEBI will determine the next step.
Currently, when you buy a stock (T+1):
You pay for it, but the stock doesn't actually show up in your account for a day. Sellers under the present T+1 system may only get 80% of their cash on the day of sale; the remaining 20% must be waited for the following day.
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With T+0:
You pay for the stock, and it gets added to your account immediately. This means:
You can sell the stock and get the money right away to buy something else.
It might be especially helpful for short-term traders who want to react quickly to market changes.
There will be two stages to the T+0 settlement cycle. Phase 1 deals made up to 1:30 pm will be taken into account for the settlement, which must be finished by 4:30 pm. Trading will begin at 1:30 pm and last until 3:30 pm in the second phase and the first phase will be discontinued.
Subject to recalibration after every 50 basis point change, a price band of -100 basis points from the standard T 1 market price will be in place. Index computation and settlement price computation are unaffected by T 0 pricing.
How does this help investors?
Increased Liquidity: This quicker access to funds allows you to re-invest your money faster, potentially taking advantage of new investment opportunities.
Improved Flexibility: Day traders who rely on short-term buying and selling can react to market fluctuations more quickly with T+0. They can utilize the freed-up funds from a sale to buy new stocks on the same day.
Reduced Risk: T+0 can potentially reduce counterparty risk, as the settlement happens immediately, eliminating the possibility of a buyer or seller defaulting on their obligation by the next day.
Example: Mr. Patel and T+0
Imagine Mr. Patel sees a stock price dip significantly on Monday morning. He decides to sell some shares he owns at this lower price.
Under T+1: He would have to wait until Tuesday to receive the money from the sale and wouldn't be able to use it to buy other stocks until then.
Under T+0: The money from the sale gets credited to his account on the same day (Monday). He can then immediately use those funds to potentially buy other stocks that might be trading at a good price due to the morning dip.
"The arrival of the T+0 settlement is a big step forward for India's stock market. It gives investors super-fast, efficient, and flexible trading options. With real-time settlement, Indian exchanges show they're serious about keeping up with innovation and making the market more competitive. This change sets the groundwork for a livelier and stronger market environment. As investors adjust to T+0 settlement, they need to stay alert. They should use technology, smart risk management, and market knowledge to grab opportunities and tackle the new challenges this shift brings," said Sunil Nyati, Managing Director, Swastika Investmart.
Initially, the ‘beta’ framework will be tested on only 25 stocks, including just three names from the Sensex components.
JSW Steel, State Bank of India, Bajaj Auto, MRF, Vedanta, and Ambuja Cements are among the stocks where a separate same-day (T+0) settlement will be available for trades executed until 1.30 pm.
The move towards the T+0 settlement comes a little over a year after India fully implemented the T+1 settlement cycle and at a time when the US market has yet to fully transition to the T+1 settlement.
As Business Standard explained earlier, "he same-day settlement framework will remain optional and run parallel to the current T+1 cycle in the equity cash segment. However, not all investors will be able to take advantage of the shorter settlement option as several brokers are not yet prepared.Large brokers, including Motilal Oswal Financial Services and Axis Securities, have said that they will not offer T+0 from Thursday. Most other large brokers also mentioned that they are awaiting system readiness before offering the facility."
Here's the complete list of stocks eligible for the T+0 settlement cycle:
1. Ambuja Cements Ltd.
2. Ashok Leyland Ltd.
3. Bajaj Auto Ltd.
4. Bank of Baroda
5. Bharat Petroleum Corporation Ltd
6. Birlasoft Ltd
7. Cipla Ltd.
8. Coforge Ltd
9. Divis Laboratories Ltd.
10. Hindalco Industries Ltd.
11. Indian Hotels Co. Ltd.
12. JSW Steel Ltd.
13. LIC Housing Finance Ltd.
14. LTI Mindtree Ltd
15. MRF Ltd.
16. Nestle India Ltd.
17. NMDC Ltd.
18. Oil and Natural Gas Corporation
19. Petronet LNG Ltd.
20. Samvardhana Motherson International Ltd
21. State Bank of India
22. Tata Communications Ltd.
23. Trent Ltd.
24. Union Bank of India
25. Vedanta Ltd
