Same-Day Settlement Option to Enhance Liquidity and Mitigate Risks in Indian Markets
The Bombay Stock Exchange (BSE) has announced a significant update for 25 stocks, including prominent names such as Bajaj Auto, Bharat Petroleum, and State Bank of India (SBI), by introducing an optional same-day (T+0) settlement, effective March 28. This move marks a departure from the traditional T+1 settlement cycle currently in practice, where transactional updates reflect in investors’ demat accounts one day after trading activities.
The introduction of the T+0 settlement cycle by BSE aims to address transactional risks and enhance market efficiency by providing immediate liquidity to investors. This strategic shift is expected to open up new trading opportunities while reducing settlement-related risks for market participants.
Analysts at ICICI Direct foresee the implementation of T+0 settlement leading to an uptick in trading volumes and improved risk management for investors operating in these designated stocks.
It’s worth noting that the T+0 settlement will remain optional for the specified 25 stocks and will be applicable solely for trades executed between 9:15 am and 1:30 pm, in alignment with the directives outlined in the Securities and Exchange Board of India (SEBI)’s circular issued on March 21.
SEBI’s guidelines further clarified that prices determined under the T+0 settlement cycle will not impact index calculations or the computation of settlement prices for shares.
To maintain market stability and prevent potential distortions resulting from price disparities between different settlement cycles, BSE has imposed a price band restriction for trading in the T+0 cycle. Transactions within this cycle will be subject to a price band of 100 basis points above or below the prices observed under the traditional T+1 settlement framework.
