SEBI to introduce optional same-day settlement from March 28

SEBI's same-day settlement: The Securities and Exchange Board of India (SEBI) is gearing up to implement changes in the cash segment settlement cycle, aiming to introduce a same-day settlement system. Chairperson Madhabi Puri Buch revealed on Monday that SEBI intends to roll out an optional T+0 settlement from March 28, with plans for instantaneous settlement by March 2025.

Global settlement alignment

The decision, likely to be finalised during the upcoming board meeting, deviates from the current T+1 settlement cycle in the Indian market, aligning it more closely with the T+2 settlement standard observed in most global markets. Concerns raised by Foreign Portfolio Investors (FPIs) regarding liquidity fragmentation prompted discussions with SEBI, with FPIs advocating for synchronisation with the US's move to a T+1 settlement cycle.

Madhabi Puri Buch stressed the necessity for instantaneous settlement, citing challenges posed by the cryptocurrency market's swift tokenisation and settlement processes. Buch stressed the importance of competitiveness against the crypto space, highlighting potential liquidity migration from the regulated market if not addressed promptly.

Phased T+0 implementation

SEBI's proposed phased approach towards T+0 settlement involves an initial optional T+0 cycle until 1:30 pm, with funds and securities settlements concluding by 4:30 pm. Subsequently, the second phase may introduce an optional immediate trade-by-trade settlement until 3:30 pm.

The move towards same-day settlement was initially outlined by Buch in September of the previous year, with further elaboration provided through a consultation paper issued in December 2023.