T+0 Settlement Deadline Pushed to November

The Indian stock market's journey towards faster settlements has hit a slight speed bump. The Securities and Exchange Board of India (SEBI) has announced an extension to implement the optional T+0 (Trade Day + 0) settlement cycle. Initially slated for an earlier rollout, the new deadline for Qualified Stock Brokers (QSBs) to ready their systems is now 1 November.

What is T+0 Settlement?

Simply put, T+0 settlement means that trades executed on a particular day are settled on the same day. This allows for quicker access to funds and securities compared to the T+1 cycle (settlement on the next trading day), which India fully adopted in January 2023. The goal is to enhance market efficiency and reduce risk.

Who are Qualified Stock Brokers (QSBs)?

QSBs are specific stock brokers designated by SEBI based on certain criteria. These parameters include:

• The total number of active clients of the stockbroker,
• The available total assets of clients with the stockbroker,
• The trading volumes of the stockbroker (excluding the proprietary trading volume of the stockbroker),
• The end-of-day margin obligations of all clients of a stockbroker (excluding the proprietary margin obligation of the stockbroker in all segments).

List of Qualified Stock Brokers

1. Groww
2. Zerodha 
3. Angel One
4. HDFC Securities
5. ICICI Direct
6. Kotak Securities
7. Motilal Oswal
8. Upstox
9. 5paisa
10. Shoonya

These stock brokers play a significant role in the market due to their large scale. SEBI assigns them enhanced responsibilities and obligations, focusing on robust risk management, governance, and investor protection standards. Their preparedness is vital for rolling out significant market infrastructure changes like the T+0 settlement system.

Why the Extension?

While the move towards T+0 is seen as progressive, the transition requires significant operational adjustments. The extension to 1 November comes after SEBI received feedback from QSBs and held discussions with stock exchanges, clearing corporations, and depositories. Key reasons for the delay include:

• Broker Readiness: Many QSBs indicated they needed more time. Implementing T+0 requires substantial upgrades to their operational infrastructure, especially the risk management and order processing systems needed to handle same-day settlements effectively and safely.
• Operational Challenges: Ensuring a smooth, error-free T+0 process across the market requires robust systems and coordination among all participants, necessitating additional preparation time.

The Road Ahead

SEBI had introduced the optional T+0 settlement for a limited set of 25 stocks in March 2024, with plans announced in December 2024 to gradually expand it to the top 500 listed companies starting in early 2025. Despite the deadline extension for QSB system readiness, the push towards faster settlements continues.

This extension provides QSBs with crucial extra time to upgrade their systems and processes. The aim is to facilitate a smoother and more stable rollout of the optional T+0 settlement cycle later this year, ultimately benefiting investors and strengthening the Indian stock market ecosystem.