One-hour trade settlement

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Overview:

Securities and Exchange Board of India (SEBI), which had in July announced it was working to launch real-time settlement of trades, is now planning to implement one-hour settlement of trades first.

About one-hour trade settlement:

  • In a one-hour settlement, if an investor sells a share, the money will be credited to their account in an hour, and the buyer will get the shares in their demat account within an hour.
  • What is trade settlement?
    • Settlement is a two-way process which involves the transfer of funds and securities on the settlement date.
    • A trade settlement is said to be complete once purchased securities of a listed company are delivered to the buyer and the seller gets the money.
    • The current cycle of T+1 means trade-related settlements happen within a day, or 24 hours of the actual transactions.
  • The migration to the T+1 cycle came into effect in January 2023.
  • India became the second country in the world to start the T+1 settlement cycle in top-listed securities after China.

 

What is a Demat Account?

  • A Demat Account or Dematerialised Account provides the facility of holding shares and securities in an electronic format.
  • During online trading, shares are bought and held in a Demat Account, thus, facilitating easy trade for the users.
  • It holds all the investments an individual makes in shares, government securities, exchange-traded funds, bonds and mutual funds in one place.

 


Q1) What are Exchange-Traded Funds?

Exchange-Traded Funds (ETFs) are investment funds and exchange-traded products that are designed to track the performance of a particular index, commodity, bonds, or a basket of assets like stocks. ETFs are traded on stock exchanges, just like individual stocks, and they provide investors with a way to gain exposure to a diversified portfolio.

Source: What is one-hour trade settlement, which SEBI is planning to launch by March next year