India today joined the league of a few countries that have implemented T+0 or same-day trade settlement cycle. Initially, a beta version of T+0 trade settlement has been implemented by the Bombay Stock Exchange (BSE). This will be available on an optional basis for eligible stocks in addition to the existing T+1 settlement cycle in cash market.
On Wednesday (March 27, 2024), the BSE released a list of 25 stocks to be eligible for the beta phase. Further, only a few brokers can offer this facility as of today. The timing of trading session for T+0 settlement will also be only between 9.15 to 1.30 pm.
Subsequently, this facility may be extended to to other stocks also.
While the announcement of T+0 settlement has created much excitement in the share trading community, this article explains how this is going to benefit them. Also, read on for a quick look at the evolution of settlement cycle in Indian stock market.
How will stock traders benefit?
The answer to the above question lies in the meaning of the T+0 settlement. Here “T” denotes the day of the trade and “0” is the day of settlement.
Under the T+0 system, share trades will be settled on the same day. For example, if you buy an eligible share today, it will be transferred to your account today itself. More over, the money that you paid to buy the share will also be deposited in the seller’s account on the same day. This development will, thus, speed up the entire share trading experience.
The availability of funds in the hands of traders on the same day will boost liquidity. It will also allow them to optimize their use of cash. Moreover, they will have cash to deploy next morning!
T+0 settlement can empower traders with super-fast, efficient, and flexible trading options.
However, traders need to stay alert as fraudsters may try to exploit the situation while the markets shift to a new settlement system. Traders should implement smart risk management and market knowledge to grab opportunities and tackle new challenges that may come up during the shift.
How has trade settlement evolved in India
Before 2002, India had T+5 settlement cycle. In 2002, the markets moved to T+3 settlement and further to T+2 settlement cycle in 2003. However, it took two decades to move to a shorter settlement cycle. The Securities and Exchange Board of India (SEBI) introduced T+1 system in 2021, which became a norm in 2023.
Disclaimer: The above content is for informational purposes only. Please consult a SEBI-registered investment advisor before investing in market-linked instruments.
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