Markets
Same day settlement takes off to a tepid start
Summary
- Currently the same-day settlement stocks are traded from 9:15 am to 13:30 pm while the normal market runs from 9:15 am to 15:30 pm .
The same-day settlement of stock market trades, or T+0, hasn't found too many takers in 14 trading days since its launch. This is despite the markets hitting successive highs over the period.
However, analysts expect more investors to hop on to the new optional settlement system once trade timings are extended and more scrips included in the new series.
A Mint analysis of data from 28 March through 19 April for 25 eligible scrips on both NSE and BSE shows negligible levels of shares traded. The total number of trades under T+0 is 3,461 so far, compared to 5.8 billion overall trades during this period.
Low trade levels
For instance , Ashok Leyland saw 502 shares traded on 28 March and one share on 2 April on the BSE , after which no trades took place on the exchange under T+0.
Also Read: Mint Explainer: What is T+0 settlement and how will it benefit investors?
Similarly, public sector State Bank of India saw only 23 shares being traded between 28 March and 19 April on NSE. Bank of Baroda witnessed just 114 shares traded on 28 March and none thereafter.
To give context, total traded quantity of SBI on the extant T+1 series of NSE was 188.7 million shares and for Bank of Baroda, 172.6 million shares from 28 March to 19 April.
In other cases, no trades have happened at all. In software company Coforge, no trade happened on either NSE and BSE. Same was the case for MRF, Birlasoft and JSW Steel.
Things could change
Describing the launch as a bold move, analysts said more investors would hop on to the bandwagon when the number of stocks under T+0 settlement increases and trade timing is extended to normal market timings.
Currently, the same-day settlement stocks are traded from 9:15 am to 1:30 pm while the normal market runs from 9:15 am to 3:30 pm.
However , market analysts said investor traction would increase as time progressed and more stocks get added.
"It's a bold experiment and will gather pace when the universe of eligible stocks is extended," said Rajesh Palviya, senior vice president (technicals & derivatives) at Axis Securities. "It's in testing phase, so let's see if more stocks are added and timing is extended. We will keep our fingers crossed."
"Sebi is a proactive regulator which tries different market developmental ideas... not all expected to be a roaring success on Day 1," said Uttam Bagri, promoter director, BCB Brokerage Pvt. Ltd. "Anyway, T+0 is merely a beta (testing) version, and we are looking forward to the announced instantaneous settlement."
What will change
Under the same-day settlement, trades made until 1:30 pm are settled by 4:30 pm. In the extant T+1, settlement happens a day after the trade is done.
In phase one, the time will be extended to 3:30 pm and in phase 2 , which will be determined by regulator, instantaneous settlement will happen.
Also Read: T+0 settlement kick starts today. Here is how it affects you
Foreign portfolio investors (FPIs) and certain institutional clients coming through custodians are excluded from phase 1 for the time being, while other clients can do same-day trades.
"...traders and investors will experience much improved liquidity as the funds will be disbursed on the day of the trade," said brokerage firm ICICI Direct in a note. "But, on the flip side, periods of high trading activity could result in creating higher market volatility."
The existing T+1 system will continue along with the T+0 settlement.
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.
