What is a T+0 Settlement?

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What is a T+0 Settlement? Blog Image

Overview:

The Securities and Exchange Board of India (SEBI) recently approved the launch of the beta version of the T+0 settlement on an optional basis.

About T+0 Settlement

  • T+0 settlement means that the funds and securities for a transaction will be settled on the day the trade was entered.
  • At present, the Indian securities markets operate on a T+1 settlement cycle, where the settlement happens on the next day of trade. 
  • In 2002, the regulator cut down the settlement period from T+5 to T+3, and in 2003, SEBI further reduced it to T+2. In 2021, the T+1 settlement started and was gradually implemented, with the final phase completed in January 2023.
  • The T+0 settlement cycle will now be offered as an alternative alongside T+1. 
  • Advantages:
    • Instant receipt of funds and securities to the investor. 
    • It will eliminate the risk of any kind of settlement shortage and give greater control over funds and securities to the investor.
    • There is expected to be lower counterparty risk and increased liquidity in the market.
  • Although the T+0 settlement system is not as common as T+1 or T+2 settlement cycles, there are a few countries and markets that have adopted T+0 settlement.
  • The Moscow Exchange (MOEX), Korea Exchange (KRX), Taiwan Stock Exchange (TWSE), and Hong Kong Stock Exchange (HKEX) offer T+0 settlements for certain types of trades and transactions. 

Q1) What is the Securities and Exchange Board of India (SEBI)?

SEBI is a statutory regulatory body that oversees the securities market in India. It operates under the SEBI Act of 1992. It is responsible for issuing regulations for various participants in the securities market, such as listed companies, brokers, mutual funds, and rating agencies.

Source: SEBI approves launch of beta version of T+0 settlement from March 28