SEBI explores same-day equity settlement with caution

The Securities and Exchange Board of India (SEBI) announced on Monday that it intends to introduce a plan for same-day settlement of equity market trades, with a commitment to proceed in a non-disruptive manner. However, SEBI also stated that it would pause the initiative if there were "serious objections" from market participants.

Offshore investors have expressed concerns about SEBI's instant settlement plan, fearing that it might introduce two settlement cycles, potentially fragmenting the system and increasing trading costs. Reuters reported these concerns last month.

India transitioned to a T+1 settlement system in January, allowing trades to settle within a day. The SEBI now aims to introduce instant settlement as an additional option by October next year.

Ananth Narayan, a Whole-Time Member of SEBI, acknowledged the regulator's concerns regarding potential liquidity fragmentation. He stated, "If there are serious objections, we will not proceed, but we are currently exploring instant settlement in a non-disruptive manner." He made these remarks at Mumbai's The Network Forum Asia, a forum for offshore investors and custodian banks.

SEBI believes that the instant settlement plan could benefit Indian retail investors and is actively working to mitigate fragmentation risks, according to a source familiar with the regulator's perspective, as reported by Reuters.

Narayan also mentioned that SEBI has established a working group, led by a former SEBI whole-time member, to streamline regulations and the registration process for offshore funds.

(With Reuters inputs)