Stock market: Stock market shifts to T+1 settlement cycle

Mumbai: The Indian stock market shifted to the shorter and quicker T+1 or ‘Trade plus 1’ settlement cycle on Friday. In the first phase, 100 stocks based on the lowest market capitalisation on the NSE were put under the new settlement cycle. This means those transacting in shares falling under the T+1 settlement cycle will get their money or shares delivered within 24 hours.

Henceforth, 500 stocks will be added under the new settlement system on last Friday of every month

At present, trades on Indian stock exchanges are settled within two days after they take place, known as T+2 settlement. A shift to the T+1 system would result in settlements happening the next day, a move aimed at making the market more efficient by reducing the time between cutting a deal and its conclusion. Most global markets still follow the T+2 settlement system. The new norms have been introduced despite opposition from some foreign investors.

“T+1 should be a good move making settlement cycle shorter reducing margin requirement for clients with margin blocked for just one day, thereby increasing retail participation and investments coming to equity markets,” said Anupam Agal, head operations & legal, Motilal Oswal Financial Services.

“T+1 settlement system will shorten the settlement cycle by a day reducing the risk of pay-in/pay-out defaults, lower margin requirements and give investors more liquidity with the availability of funds and securities,” he added.

In April 2003, the regulator had shortened the settlement cycle from T+3 rolling settlement to T+2.