T+0 Settlement Cycle ( or Same Day Settlement)

Context:

The Indian Stock Market recently introduced the T+0 settlement cycle, marking a significant shift from the existing T+1 settlement cycle.

About the T+0 Settlement Cycle:

The trades involving shares are settled on the same day they occur in the T+0 system. It means shares are transferred to the buyer’s account and funds are deposited in the seller’s account on the same day of the trade.

It is a departure from the current T+1 cycle, where trades are settled by the next day.

The T+0 settlement will be optional for 25 stocks and will be applicable only for trades executed between 9:15 a.m. and 1:30 p.m.

Phased Implementation:

The T+0 settlement cycle will be executed in two phases.

First Phase: Trades executed up to 1:30 pm will be considered for settlement, which must be completed by 4:30 pm.

Second Phase: It extends trading time till 3:30 pm, discontinuing the first phase.

Impact on Investors and Traders:

The T+0 settlement cycle is expected to benefit investors and traders by providing immediate liquidity.

It means there will be increased trading opportunities and reduced settlement risks.

The current T+1 system, sellers receive only 80% of their cash on the day of sale, with the remaining 20% withheld until the following day.

However, with the new T+0 settlement system, sellers will have immediate access to 100% of their cash on the day of the transaction.