Stock exchanges on Friday deferred the voluntary implementation of the T+0 or same-day settlement cycle of securities for institutional clients, which was supposed to apply from September 30.
Apart from lacklustre volumes from retail investors, foreign portfolio investors have resisted a move to T+0 even on an optional basis, said people in the know. For T+0, prefunding of both cash and securities will be needed, which will be an issue for FPIs.
Exchanges rolled out the beta version of T+0 from March 28 for retail clients, which will continue. This was for transactions in 25 securities.
Risk reduction
T+0 facilitates quicker receipt of funds and securities in investor accounts, reducing the risks associated with the time lag. It was supposed to be highly beneficial to retail investors who come with limited cash into the market and was supposed to result in optimal utilisation of funds.
Market observers said the beta version of T+0 has not taken off, with few brokers offering the settlement facility. Activity so far has been restricted to token trades, resulting in low volumes. Some feel that systems are not yet in place for smooth operations. In September, for instance, only Geojit Financial Services and Navia Markets offered the T+0 facility on NSE. There was no trading in any security on Friday under T+0.
Subdued Engagement
On day one, 63 members participated in this optional segment on the BSE. Forty-one members traded in 10 scrips and placed a total of 329 orders which resulted in 90 trades. On NSE, 66 trading members had placed 209 orders for 87 unique PANs in 24 securities. This resulted in 46 trades in 14 securities.
“All market infrastructure participants have to be in sync for the settlement process to be smooth. This includes systems set up by banks, clearing corporations and broker back offices. That may require some more work,” said Kranthi Bathini, Director-Equity Strategy at Wealthmills Securities.
“Volumes attract volumes. There is little incentive for investors right now to move to same-day settlement,” said a broker.
The same-day settlement is in addition to the existing T+1 settlement cycle currently in play and will be a precursor to an instant settlement that may be rolled out on an optional basis at a later date.
The adoption of a shorter settlement cycle has benefited the securities ecosystem, SEBI chief Madhabi Puri Buch had said at an annual summit on corporate governance organised by the Confederation of Indian Industry earlier this year.
Error rates for settlement of trades of FPIs had reduced under the T+1 settlement cycle compared to what it was under the T+2 cycle, SEBI whole-time member Ananth Narayan had said recently.
T+1 was introduced in 2021 and implemented in phases. The beta version of the T+0 settlement cycle has been made available on an optional basis from March 28 this year.
