SEBI Circular on T+0 rolling Settlement Cycle for Equity Cash Markets

The Securities and Exchange Board of India (SEBI) has issued a Circular on the T+0 rolling Settlement Cycle for Equity Cash Markets.

The Circular Reads as follows:

SEBI vide Circular No. SEBI/HO/MRD2/DCAP/P/CIR/2021/628 dated September 07, 2021, allowed for the introduction of a T+1 rolling settlement cycle. All stock exchanges, clearing corporations and depositories (collectively referred to as “Market Infrastructure Institutions (MIIs)”) jointly decided to shift to the T+1 settlement cycle in a phased manner, which was fully implemented w.e.f. January 27, 2023.

The enormous development of MII technology, architecture and capacity opens up options to accelerate clearing and settlement timelines. Furthermore, India’s depository ecosystem has a digital sight of individual client-level holdings, allowing for immediate securities transfers, and India’s payments and settlements network has long allowed for real-time fund transfers.

A shortened settlement cycle will bring cost and time efficiency, transparency in charges to investors and strengthen risk management at clearing corporations and the overall securities market ecosystem.

As a result of the recommendations of the Working Group consisting of MIIs, public comments, and the recommendations of SEBI’s Risk Management Review Committee, a proposal to introduce optional T+0 settlement and subsequent optional Instant Settlement, in addition to the existing T+1 settlement cycle, was presented to the SEBI Board for approval.

Following Board deliberations and approval, it has been decided to establish a framework for the optional introduction of the Beta version of the T+0 settlement cycle in addition to the existing T+1 settlement cycle in the equity cash market, for a limited set of 25 scrips and a limited number of brokers.

The operational guidelines in this regard are as under:

a. Eligible Investors: All investors are eligible to participate in the segment for the T+0 settlement cycle if they are able to meet the timelines, process and risk requirements as prescribed by the MIIs.

b. Surveillance Measures: The surveillance measures as applicable in the T+1 settlement cycle shall be applicable to scrips in the T+0 settlement cycle.

c. Trade Timings: One continuous trading session from 09:15 AM to 1:30 PM.

d. Price Band: The price in the T+0 segment will operate with a price band of +100 basis points from the price in the regular T+1 market. This band will be re-calibrated after every 50 basis points movement in the underlying T+1 market.

e. Index calculation and settlement price computation: T+0 prices will not be considered in index calculation and settlement price computation. There shall be no separate close price for securities based on trading in the T+0 segment.

f. Netting of Obligations: There shall be no netting in pay-in and pay-out obligations between T+1 and T+0 settlement cycle.

To ensure a smooth implementation, the MIIs must publish other operational guidelines (including trading, clearing, and settlement mechanisms, risk management, and so on) and Frequently Asked Questions (FAQs), as well as a list of 25 scrips for the Beta version of the T+0 settlement cycle, on their respective websites.

On a regular basis, MIIs must publish a list of brokers who are participating in the Beta version of the T+0 settlement cycle on their websites.

MIIs shall provide a fortnightly report on the progress of activities in the Beta version of T+0 settlement cycle till further direction. The provisions of this circular shall come into force with effect from March 28, 2024.

SEBI will continue to consult with stakeholders, including users of the beta version of the T+0 settlement cycle.

All MIIs are advised to:

a. take necessary steps and put in place necessary systems for implementation of the above;

b. make necessary amendments to the relevant bye-laws, rules and regulations, wherever required, for the implementation of the above; and

c. bring the provisions of this circular to the notice of market participants (including investors) and also to disseminate the same on their websites;

This circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act 1992, read with Regulation 51 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, Section 26(3) of the Depositories Act, 1996 and Regulation 97 of Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

For Official Circular Download PDF Given Below: