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All Future And Option Segment Stocks To Be Settled In T+1 Cycle From Jan 2023

Since Feb 25 this year, the bottom 100 stocks have been settled in the T+1 cycle, but starting Jan 2023, all stocks in the derivative segment would be settled in the same way.

Come January 2023, all stocks in the derivative contracts segment would be settled in the T+1 cycle, the market infrastructure institutions (MIIs) said in a joint statement.

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The announcement comes after the Securities and Exchange Board of India (Sebi ), on Jan 1, 2022, permitted the stock exchanges to introduce a T+1 settlement cycle for securities in the equity segment.

The exchanges, however, started implementing the T+1 feature for the bottom 100 stocks on Feb 25 this year. But last Friday, they added 500 more shares to the T+1 settlement list.

According to the earlier schedule, all the future and option (F&O) contract stocks were to transition to T+1 settlement in two batches in December 2022 and January 2023. Now, the transition of all F&O stocks would be done in a single tranche.

The stock exchanges are expected to issue another circular detailing the process and factors.

However, why did India moved to T+1 cycle, are there any benefits to traders and investors ?

Move To T+1

The move is expected to address the issue of short delivery. There were many instances when a stock buyer did not get their shares due to short-selling.

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Also, there have been instances when brokers failed to pay the funds held by clients as the stocks were settled on a T+2-basis.

India is the second country after China to implement the T+1 settlement cycle. The faster T+1 cycle is expected to eliminate most of the problems in the settlement process.

Deepak Singh, chief business officer at RelianceSmartMoney.com, earlier told Outlook Money that the T+1 cycle will help address the clients’ collateral risk as it is now vested with the Clearing Corporation.

Hence, instances of payment default, non-transfer of shares, etc., will reduce. Brokerage firms believe the new cycle will also reduce the broker’s operational risks.

The implementation of T+1 cycle since Feb 25, 2022, has been in a gradual manner since its adoption may cause some temporary difficulties for foreign portfolio investors (FPIs)

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