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.
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.
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)
