Sebi prescribes T+1 rolling settlement on optional basis
08 September 2021
Markets regulator Securities and Exchange Board of India (Sebi) on Monday issued a circular allowing for a shortened rolling settlement cycle of T+1, further reducing the settlement time for trades on stock exchanges from T+2 and the earlier T+3 cycle.
The move is aimed at improving market liquidity and boosting trading activity on the bourses.
Sebi had, on 1 April 2003, reduced the rolling settlement cycle to T+2, from the earlier T+3. Since then, the regulator said, it has been receiving requests from various stakeholders to further shorten the settlement cycle.
The decision has been made based on discussions with stock exchanges, clearing corporations and depositories, it added.
Sebi said, for the sake of flexibility in operations, stock exchanges may offer either T+1 or T+2 settlement cycle on any of the scrips, after giving an advance notice of at least one month, regarding change in the settlement cycle, to all stakeholders, including the public at large, and also disseminating the same on its website.
After opting for T+1 settlement cycle for a scrip, the stock exchange should have to mandatorily continue with the same for a minimum period of 6 months. Thereafter, in case, the stock exchange intends to switch back to T+2 settlement cycle, it should do so by giving 1-month advance notice to the market.
Any subsequent switch (from T+1 to T+2 or vice versa) should be subject to minimum period and notice period.
There should not ne any netting between T+1 and T+2 settlements.
The settlement option for security should be applicable to all types of transactions in the security on that stock exchange. For example, if a security is placed under T+1 settlement on a stock exchange, the regular market deals as well as block deals will follow the T+1 settlement cycle on that stock exchange.
Sebi said the new directions may take effect from 1 January 2022. It has directed stock exchanges, clearing corporations and depositories to take necessary steps to put in place proper systems and procedures for smooth introduction of T+1 settlement cycle on optional basis, including necessary amendments to the relevant bye-laws, rules and regulations.