Markets
Brokers seek time to prepare for same day settlement
Summary
Sebi's introduction of same-day settlement for retail investors faces operational challenges as brokers seek a deadline extension. With few brokers ready, Sebi may grant more time before expanding the same-day settlement cycle to the top 500 stocks.Retail investors' dreams of settling their trades on the same day that transactions occur aren't likely to materialise significantly more than a year after the Securities and Exchange Board of India (Sebi) launched the same-day settlement cycle, or T+0.
At a meeting last week, close to 10 qualified stock brokers (QSBs) requested that market regulator Sebi extend the 1 May deadline for offering a same-day settlement option to any of their clients desirous of such a cycle.
As most top brokers are operationally unprepared for such a cycle, Sebi could extend the deadline for the QSBs to provide their clients with the option of same-day settlement. Currently, very few brokers offer this option to clients as their risk management and order management systems cannot handle the scale for a same-day settlement.
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"Most QSBs requested the regulator to stretch the 1 May deadline by three to four months to become operationally fully prepared for offering clients the option for completion of trade on the same day," said a QSB official aware of the meeting.
"I think Sebi could grant us more time to get our systems fully geared for same-day settlement," said the head of another QSB. He added that the current settlement cycle of T (trade) plus one—where shares hit a client's demat account and money is credited to the seller's account a day after the trade—was "very popular" among market participants.
An email query to Sebi on whether the deadline for QSBs would be extended was not answered till press time.
However, a person aware of the development said that Sebi is not mandating "universal adoption," but is still closely monitoring several issues, such as "FPI participation and custodian readiness."
To be sure, India became the first country to implement a T+1 settlement cycle for all listed stocks on 27 January 2023. On 28 March 2024, a year later, Sebi introduced the optional T+0 settlement.
Retail-only in phase one
In the first phase, trades by retail investors between 9:15 am and 1:30 pm are considered for same-day settlement by 4:30 pm, according to ICICI Securities. Gradually, trading hours will be extended to 3:30 pm, in line with the regular market hours from Monday to Friday. In the second phase, institutional investors will also have the option to trade under the T+0 cycle.
While initially applicable to just 25 scrips, Sebi announced on 10 December 2024 that the optional T+0 settlement would be extended to the top 500 stocks from 31 January 2025, starting with scrips at bottom 100 companies and gradually include the next bottom 100 companies every month till the top 500 companies are available for trading in optional T+0 settlement cycle.
Currently, investors can trade in over 5,600 listed stocks.
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The regulator also clarified that entities meeting the QSB criteria—based on minimum active clients and other parameters—must put in place necessary systems and processes to enable seamless investor participation in the optional T+0 cycle.
Additionally, Sebi directed stock exchanges to implement a new “Block Deal window" exclusively for the morning session from 8:45 am to 9:00 am, in addition to the existing windows from 8:45–9:00 am and 2:05–2:20 pm for T+1 settlements. “The trades in the optional T+0 block window session will be settled on the T+0 settlement cycle," Sebi clarified.
The QSB and block deal parameters are to come into effect from 1 May 2025.
QSBs are brokers who hold a significant position in Indian stock markets based on their size, trading volumes and amount of client funds handled by them. QSBs include brokers like Groww, Zerodha, Upstox, Angel One , ICICI Securities , HDFC Securities, Kotak Securities, Motilal Oswal Financial Services, etc.
The fact of lacklustre same day settlement trading is borne by just one share of SBI being traded on BSE on Monday against 6.98 lakh being traded under the T +1 settlement cycle. On BPCL it was just 2 under T+0 zero versus 4.5 lakh under prevalent settlement and in Tata Communications just 2 shares against 32,000, per BSE data. As of FY25, there were 397 brokers handling 4.92 crore active clients of NSE, the country's largest stock exchange.
The benefits of same-day settlement include increased trading opportunities and reduced settlement risk for investors. Rolling settlement was introduced on a T+3 basis in 1993, followed by a T+2 settlement cycle in 2003. Sebi implemented the existing T+1 settlement in January 2023.
Currently, buying in one settlement cycle and selling in the other is not possible.
