Sebi allows T+1 settlement for stocks

By Livemint, Vivek Punj
There will be no netting between T+1 and T+2 settlement cycles. (REUTERS)

Securities and Exchange Board of India (SEBI) has extended the option to stock exchanges where they can choose between T+1 and T+2 settlement cycles. The decision came after the market regulator received request from various stakeholders to further shorten the settlement cycle.

“Based on discussions with Market Infrastructure Institutions (stock exchanges, clearing corporations and depositories), it has been decided to provide flexibility to stock exchanges to offer either T+1 or T+2 settlement cycle," Sebi said in a statement on Tuesday.

The T+1 settlement cycle will come into effect from January 1, 2022.

The settlement cycle represents the time period within which stock exchanges have to settle security transactions. T+1 means settlements will have to be cleared within one day after the actual transaction takes place.

A stock exchange may choose to offer T+1 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. The same has to be conveyed to the public at large, and also disseminated on the exchange's website.

After opting for T+1 settlement cycle for a scrip, the stock exchange will have to mandatorily continue with the same for a minimum of 6 months. If the stock exchange intends to switch back to T+2 settlement cycle, it can do so by giving 1-month advance notice to the market.

There shall be no netting between T+1 and T+2 settlements, said Sebi.

“The settlement option for security shall 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 stated.

The market watchdog 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.

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