After China, India on January 27 became the second country in the world to start the ‘trade-plus-one’ (T+1) settlement cycle in listed securities in stock exchanges.
Key points
- The T+1 settlement cycle means that trade-related settlements must be done within a day, or 24 hours, of the completion of a transaction.
- Under T+1, if a customer bought shares on Monday, they would be credited to the customer’s demat account on Tuesday. This is different from T+2, where they will be settled on Wednesday.
- As many as 256 large-cap and top mid-cap stocks, including Nifty and Sensex stocks, came under the T+1 settlement from January 27.
- Until 2001, stock markets had a weekly settlement system. The markets then moved to a rolling settlement system of T+3, and then to T+2 in 2003. T+1 is being implemented despite opposition from foreign investors. The US, UK and Eurozone markets are yet to move to the T+1 system.
- In the T+1 format, if an investor sells a share, she will get the money within a day, and the buyer will get the shares in her demat account also within a day. This will also help investors in reducing the overall capital requirements with the margins getting released on T+1 day, and in getting the funds in the bank account within 24 hours of the sale of shares.
- The shift will boost operational efficiency as the rolling of funds and stocks will be faster.
