What is the T+0 system? India’s stock market starts world’s fastest stock settlement – check full list of stocks, benefits & more

What is the T+0 settlement system? India’s stock market has introduced the T+0 settlement system from today, joining a select group of countries adopting a shorter trade settlement cycle. This is the world’s fastest stock settlement system. The implementation will begin with a ‘beta version’ to ensure a smooth transition before its full launch. We answer some of your frequently asked questions on the new settlement system.

So, to begin with, let’s understand what is the T+0 settlement system?

In the T+0 system, trades in shares will be settled on the same day of the trade.This implies that shares will be transferred to the buyer’s account and funds deposited in the seller’s account on the trade day itself, departing from India’s current T+1 cycle where trades settle the next day, states an ET report.

What does the T+0 ‘beta’ settlement system mean?

The ‘beta’ version of the shorter settlement cycle is a pilot project where exchanges will offer the system alongside the existing T+1 cycle in the cash market. Both settlement cycles will co-exist, with same-day settlement available for 25 stocks and a limited number of brokers permitted to provide this service. Trading for T+0 stocks will be restricted to 9:15 AM to 1:30 PM.

What are the benefits of the T+0 settlement system?

The new system aims to enhance dynamism on full implementation, improving liquidity by enabling same-day availability of funds from selling. Jimeet Modi, founder of Samco Securities told ET about the benefits for retail traders, emphasizing the importance of prompt fund availability for the next day’s trading. Brokers note the delays in fund receipt under the current T+1 settlement, hinder the efficiency of a shorter cycle.

T+0 settlement system: Full list of 25 stocks

What’s in it for brokers?
For brokers catering to retail clients, adaptability will be key, asserts Gaurang Shah, senior vice president at Geojit Financial Services. Shah emphasizes the need for brokers to manage finances efficiently and pass on benefits to clients. The shorter settlement cycle could reduce funding requirements, releasing funds earlier when trades settle promptly.
Any challenges of the T+ 0 settlement system?
Institutional investors, particularly foreign funds, may encounter challenges with the T+0 system. Unlike retail traders, large funds operate differently, necessitating advance preparation for same-day settlement and exposure to currency risks. Overseas investors will need to allocate funds ahead of trades, factoring in time zone disparities. The process involves intermediaries like custodian banks, foreign exchange banks, and brokers.
India’s stock trade settlement cycle has evolved from T+5 to T+3 in 2002, further reducing to T+2 in 2003. Sebi introduced the T+1 system in 2021 before making it mandatory in 2023, with instant trade settlement on the horizon.
What are the global norms?
Globally, most markets follow the T+2 stock trade settlement, with the US transitioning to T+1 soon. The European Union may follow suit, observing the outcomes in the world’s largest securities market. In Asia, China offers T+0 settlement, while other markets mostly operate on a T+2 cycle.