SEBI’s Vision for the Future: Migration to One-Hour and Instantaneous Trade Settlements Soon

The stock market landscape is about to witness a groundbreaking change as SEBI, India’s market regulator, gears up to revolutionise trade settlements. In a significant move, SEBI chairperson Madhabi Puri Buch announced at the Global Fintech Fest 2023 that India is set to shift from the conventional ‘T+1’ settlement to one-hour trade settlements, ultimately culminating in instantaneous trade settlement.

Key Highlights of SEBI’s One-Hour Trade Settlement Changes

  • SEBI plans to transition from ‘T+1’ settlements to one-hour trade settlements and eventually to instantaneous settlements.
  • SEBI chairperson Madhabi Puri Buch emphasised the transformation of incumbents into fintech entities.
  • Market sources suggest one-hour settlements may be implemented by March 2024, followed by instantaneous settlement six months later.
  • India previously shifted to a shorter ‘trade-plus-one’ (T+1) settlement cycle in January 2023, following China’s lead.
  • This transition promises increased liquidity and reduced risk for Indian investors.
  • MSCI praised the shift to ‘T+1’ for its benefits, including enhanced investor protection and operational efficiency.
  • The US and Canada also plan to transition to T+1′ settlements in May 2024, aligning with India and China’s moves.

Madhabi Puri Buch expressed her belief in the transformative power of technology within the financial sector, stating, “From T+2 settlement, we have moved to T+1. We are now talking about moving from T+1 to instantaneous settlement.” She emphasised how incumbent financial institutions are evolving into fintech entities, illustrating the rapid adaptation of modern technology in the industry.

“When incumbents, who have the cash flow and the manpower, put their mind to it and apply modern technology, they become new rocketships,” she added.

While no specific timeline for this transition was disclosed, market sources indicate that one-hour trade settlements could become a reality by March 2024, followed by the implementation of instantaneous settlement six months thereafter.

The Evolution of Trade Settlements in India

Back in January 2023, Indian stock exchanges made a pivotal shift to a shorter and more efficient ‘trade-plus-one’ (T+1) settlement cycle. This marked a significant milestone for the country’s capital markets as it bid farewell to the ‘T+2’ rolling settlement principle that was in place previously.

T+ 1 Settlement

The T+1 settlement rule signifies that all trade-related settlements must be concluded within a single day or 24 hours. For instance, if an investor purchases 50 shares on a Monday, these shares should be reflected in their Demat account by Tuesday.

This transition was praised by MSCI in June, highlighting the advantages of a shorter settlement cycle, including enhanced investor protection, reduced financial system risks, improved operational and capital efficiency, and increased resiliency in the securities market.

India now stands as the second country, following China, to implement the T+1 trade settlement. Meanwhile, the United States and Canada have announced their plans to make a similar transition to T+1 in May 2024, signifying a global shift towards quicker and more efficient trade settlements.

What Could One-Hour and Instantaneous Trade Settlements Mean for Indian Investors?

For Indian investors, this move towards one-hour and instantaneous trade settlements holds the promise of increased liquidity and reduced risk. 

  • With trades settling faster, investors can access their funds sooner, allowing for more agile investment decisions. 
  • The enhanced efficiency and reduced settlement times may attract more investors to the Indian stock market, both domestic and international, bolstering its status as an attractive investment destination. 

However, investors will need to adapt to the faster pace of trading and ensure their systems and strategies are in sync with the new settlement timelines. Overall, this transition has the potential to reshape the landscape for Indian investors, offering them greater flexibility and opportunities in the ever-evolving world of finance.



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