Stock exchanges launch same day transaction settlement beta version from today

Stock Exchanges are set to launch the same day transaction (T+0) settlement beta version from today. With this Indian share market becomes one of the few markets in the world to implement the shorter trade settlement cycle.

The beta version will be launched 25 scrips in the cash segment to ensure the smooth functioning of the shorter settlement cycle before its full-fledged launch. The list includes heavyweights such as Bajaj Auto, Cipla, Hindalco Industries, JSW Steel, and State Bank of India.The T+0 settlement cycle will happen concurrently with the T+1 settlement cycle

T+0 Settlement Cycle

T+0 settlement cycle aims at settling the trades done on the same day. By this, shares will be transferred to the buyers account and the funds will be settled into the sellers account on the same day.

Also Read: SEBI aims to introduce instant settlement in stock markets by FY25

There will be two phases for this cycle. Phase 1 deals made up to 1:30 pm will be taken into account for the settlement, which must be finished by 4:30 pm. Trading will begin at 1:30 pm and last until 3:30 pm in the second phase and the first phase will be discontinued.

Currently, the market is considering same-day transaction settlement within a year after fully embracing the T+1 cycle. In the T+1 cycle, sellers get only 80% of their cash on the day of sale; the remaining 20% must be waited for the following day.

Benefits and challenges of T+0 settlement cycle

As per The Economic Times, a shorter settlement cycle on full implementation is aimed at making the system more dynamic. Since funds will be available on the same day of selling, it is expected to improve liquidity, allowing traders to use cash better.

"One of the biggest successes of the T+0 system for retail traders will be if they receive funds on the same day and are available for the next day's trading," Jimeet Modi, founder of Samco Securities told the publication

However this system is not without challenges. Institutional investors, mainly foreign funds, could face the biggest challenges as they function differently from retail traders who bring in money before their trades are executed. The same day settlement also expose such investors to currency risks. Foreign investors will have to arrange money a day earlier, considering the time zone differences.

It is to be noted that, overseas managers opposed the shift to T+1 settlement cycle the most.