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Published: Jan 18, 2023
Updated: Jan 18, 2023

India Advances Market Efficiency with T+1 Settlement for Derivative Stocks

India leading in improving operational efficiency of derivative market

Indian stock exchanges have announced a major change in the settlement cycle for all stocks that have derivatives contracts. The T+1 settlement cycle, also known as 'Trade plus one' settlement, will be implemented in January 2023, bringing operational efficiency and ease for market participants. This move is expected to make the settlement process faster, providing a more seamless experience for investors and traders.

Move to Streamline operations:

The decision to implement T+1 settlement in a single batch, instead of the previously planned two batches, is aimed at streamlining the process and making it more convenient for all stakeholders. This move is expected to enhance the overall efficiency of the Indian stock market, making it more attractive to investors and traders

Background on T+1:

The T+1 settlement cycle, also known as 'Trade plus one' settlement, enables investors to receive their money or shares within 24 hours of a trade being executed. This is a shorter settlement cycle compared to the previous T+3 rolling settlement, which was established by India's Securities and Exchange Board (SEBI) in April 2003.

Implementation of T+1:

The transition of F&O stocks to T+1 settlement was originally set to take place in two phases, with the first phase scheduled for December 2022 and the second for January 2023. However, it has been decided that all stocks will now be transitioned in January 2023. In the initial phase of the rollout in February 2022, 100 stocks with the lowest market capitalization on the National Stock Exchange (NSE) were put under the new settlement cycle. From March 2022, the next bottom 500 stocks have been made available for introduction to T+1 settlement every month until January 2023.

Quick and Shorter Settlement cycle:

The transition to T+1 settlement is aimed at increasing operational efficiency and ease for market participants by allowing for quicker and shorter settlement cycles. The stock exchanges will issue a circular with the revised schedule for the transition of stocks to T+1 settlement and inform the list of stocks to be transitioned in December 2022 and January 2023.