Indian stock markets achieve complete transition to T+1 settlement

New Delhi: Indian stock markets on Friday achieved a complete transition to a shorter settlement cycle or T+1 regime, a move that will bring significant capital efficiencies to the investors and improve risk mitigation for the entire industry.

What is T+1 settlement

T+1 (trade plus one) means that market trade-related settlements will need to be cleared within one day of the actual transactions taking place. Earlier, trades on the Indian stock exchanges are settled in two working days after the transaction is done (T+2).

All trades from January 27 executed in any securities in the equity segment will be settled on a T+1 basis, the National Stock Exchange (NSE) said in a statement.

The journey to shortening the settlement cycle began on September 7, 2021, when capital markets regulator Sebi allowed stock exchanges to introduce the T+1 settlement cycle from January 1, 2022, on any of the securities available in the equity segment.

Following this, all the market infrastructure institutions -- stock exchanges, clearing corporations and depositories -- jointly finalised the roadmap for the implementation of the T+1 settlement cycle in a phased manner.

The first batch of securities transitioned to T+1 settlement on February 25, 2022, and thereafter, every month a batch of around 500 securities transitioned to T+1 settlement.

From January 27, all securities -- equity shares including SME shares, exchange-traded funds (ETFs), Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), Sovereign Gold Bond (SGB), Government Bonds and Corporate Bonds trading in the equity segment will now be settled only on T+1 basis.

Globally most stock exchanges in developed as well as emerging markets follow the T+2 settlement system.

"It's a great achievement for the Indian capital market. The achievement would not have been possible without the continuous guidance provided by Sebi and painstaking effort taken by all MIIs (Market Infrastructure Institutions), particularly the clearing corporations, trading members, clearing members, custodians, and all other stakeholders in re-engineering the processes and crunching timelines to adapt to shorten the settlement cycle.

"The shortening of the settlement cycle to T+1 will bring in significant capital efficiencies to the investors and improve risk mitigation for the entire industry," NSE MD and CEO Ashishkumar Chauhan said.

The exchange said that achievement is significant considering the NSE size and scale of operations in the equity segment.