India To Probably Become World’s First Country To Shift To Shorter Trading Cycle T+1 From January 27

A day after Republic Day, India will probably become the world’s first country to completely shift to the shorter trading cycle T+1.?

India To Completely Shift To T+1 Cycle From January 27

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Ahead of big markets such as the US and China which are yet to do so, the Indian equity market will completely shift to a shorter trading cycle called, T+1 settlement?on January 27, 2023. This will allow buyers and sellers to get shares and money in their accounts one day after the trade ends.

The T+1 settlement system will give investors the option to trade more by rolling the funds and shares faster. The settlement cycle is said to be completed only when the buyer receives the shares and the seller receives the money.

In India, the settlement process has been based on the rolling settlement principle of T+2 in recent times. Reducing the settlement cycle further to T+1 will enhance market liquidity.

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T+1 Settlement Began From February 2022

In November 2021, the stock exchanges informed that they will implement the T+1 settlement cycle in a phased manner, starting with the bottom 100 stocks in terms of market value from February 25, 2022. Thereafter, 500 more stocks will be added based on the same criteria of market value from the last Friday of March 2022 and every following month thereafter.

Those transacting in stocks falling under the T+1 settlement cycle will get their money or shares delivered in less than 24 hours.

Complete Shift January 27 Onwards

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From January 27, all the large-cap and blue-chip stocks will move to the T+1 system. Indicating the completion of the move, last Friday, a circular from the NSE reportedly said that there would be no further circulars from the bourse regarding the list of securities shifting to T+1 settlement.

After the new rule, if an investor buys 50 shares on Monday, these will be received in their Demat account on Tuesday.

This will reportedly make India the first country in the world to go for such a quick settlement putting us ahead of the US, as per Money Control.

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Applauded On Twitter

Reacting to this announcement, author and chief advisor to the Chief Minister of Odisha state government, R. Balakrishnan tweeted, "Kudos to @SEBI_India. T+1 from 27 January. The next step is to let us deal directly on screen without a broker. Technology has been used well by Sebi."

SEBI (Securities and Exchange Board of India) Research Analyst Alok Jain took to Twitter saying, "India is a leader in many Firsts.... after UPI, here comes T+1 settlements!!"

The move to shift to T+1 settlement comes two decades after the Indian market decided to shift to the T+2 settlement cycle from T+3 on April 1, 2003. Most markets around the world follow the T+2 system. However, digital reliance on trading is pushing bourses to shorten the settlement cycles.

Trade Settlement Time In Different Countries

Unlike the?Indian equities market which is set for a complete shift to T+1 later this month, most stock exchanges around the world currently work on the T+2 settlement system, which means the settlement occurs two business days after the day the order executes, i.e.T+2 (trade date plus two days). So, for example, if you placed an order for sale/purchase of on Monday, it would typically be settled by Wednesday.?

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