Exchanges to kick off T+1 settlement cycle from February

By: |
November 09, 2021 2:15 AM

Under the new cycle, all market-related trades and settlements will be processed within a day of the actual transaction. Currently, the exchanges follow the T+2 (trading plus two days) settlement cycle, wherein trades are settled in two working days post the transaction.

The inclusion of stocks will take place on the last Friday (trade day) of every month. In case, if the respective day is a trading holiday, the same shall be executed on the immediate next trading day.The inclusion of stocks will take place on the last Friday (trade day) of every month. In case, if the respective day is a trading holiday, the same shall be executed on the immediate next trading day.

Two months after the markets regulator allowed the stock exchanges to offer a shorter settlement cycle for traded stocks, market intermediaries have given a formal road map for a shorter settlement cycle of T+1 (trade plus 1 day). On Monday, market infrastructure institutions (exchanges, clearing corporations, and depositories) agreed to implement the T+1 settlement cycle of securities from February 25. The new settlement cycle will be kicked off in a phased manner.

Under the new cycle, all market-related trades and settlements will be processed within a day of the actual transaction. Currently, the exchanges follow the T+2 (trading plus two days) settlement cycle, wherein trades are settled in two working days post the transaction.

“T+1 settlement prima-facie looks to be a good move making the settlement cycle shorter, reducing margin requirement for clients, with margin being blocked for just one day, thereby increasing retail participation and investments coming to equity markets,” Anupam Agal, head operations, Motilal Oswal Financial Services, told FE.

The exchanges and depositories in a joint statement on Monday said based on the daily market capitalization averaged in October 2021, the first 100 stocks from the bottom shall be included in the new settlement cycle from February 2022. The next 500 stocks from the bottom will be included from March 2022. The last bunch of securities will be completed on January 23, 2023.

A series of large-cap companies, including RIL, HDFC Bank, Axis Bank, ITC, DRL, Titan, TCS, and Bajaj Twins, will be included in the T+1 settlement cycle from January 27, 2023.

The inclusion of stocks will take place on the last Friday (trade day) of every month. In case, if the respective day is a trading holiday, the same shall be executed on the immediate next trading day. “Process and other technicalities would get clear once the first phase of stocks get moved to T+1 settlement in February,” Agal said.

New companies hitting the bourses after October 2021 will be included in the list, considering their daily market capitalization calculated on the basis of the average trading price of the scrip after 30 days of commencement of trading.

According to the statement, in case, based on market capitalisation, the stock falls under the category (in terms of market capitalization) of stocks already under T+1 settlement, then that stock also becomes eligible for T+1 settlement and will be introduced in T+1 settlement cycle on the last Friday (trade day) of next month.

This will also apply to a new stock getting listed on account of initial public offering, corporate action or any other reason, and the date of transition will be announced jointly by all the exchanges on which the stock is available for trading, the statement said.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Wall Street leaps as Nasdaq rallies 3% on boost from Big Tech, chipmakers
2Rategain Travel IPO subscribed 41% on Day 1 of offer
3Decline in prices of Bitcoin, others hit crypto fund inflows, leads to $40m outflows: Report