BSE to begin T+1 settlement in Jan

Mumbai: The BSE is moving towards optional T+1 (day) trade settlement in the equity cash segment, according to a communication issued by the exchange to its members. The bourse is expected to offer the facility from January 3, 2022.

T+1 settlement will be a major advantage for retail individual investors, who will get money after selling shares one day earlier than they now get in T+2 settlement. Some brokerages like ICICI Securities have started offering same day payment for trades bellow Rs 1 lakh for select securities.

Few countries have T+1 settlement. Most developed markets like Hong Kong, Singapore, Japan and South Korea offer T+2 settlement. Taiwan, which had switched to T+1 settlement, has moved back to T+2 cycle.

Though this shorter settlement cycle is proving to be a challenge for foreign portfolio investors, who have to also deal with the currency movement in the same time period.

Markets regulator Securities and Exchange Board of India, through its circular on September 7, allowed exchanges to introduce T+1 rolling settlement on an optional basis from January 1, 2022.

The Sebi had shortened the settlement cycle from T+3 rolling settlement to T+2 from April 1, 2003.

"Sebi has been receiving request from various stakeholders to further shorten the settlement  cycle.  Based  on  discussions  with market  infrastructure  institutions (stock exchanges, clearing corporations and depositories), it has been to provide flexibility to stock exchanges to offer either T+1 or T+2 settlement cycle" the regulator said in the circular allowing T+1 settlement.

Stock exchange may choose to offer T+1 settlement cycle on any of the scrips, after giving an advance notice of at least one month, regarding change in the settlement cycle, to all stakeholders, including the public at large, the Sebi said.

Since then the BSE has been sharing details on rolling out T+1 settlement from January 3, 2022.

The exchanges have the flexibility to offer either T+1 or T+2 settlement cycle on any securities.

"The effect of corporate actions in the settlement process pertaining to a scrip traded in T+1 settlement or T+2 settlement will be based on ex-entitlement date of the scrip decided by the respective exchanges," the BSE said in a communication issued on October 14.

"Separate obligation, margin files, etc. will be provided to members for T+1 settlement.

“Details pertaining to settlement timings, auction session timings etc. will be informed to the members through a separate circular," it said.

"Settlement cycle shall be indicated (in the scrip master file) against each security having value as ‘1’ – for securities with settlement cycle as T+1 or ‘2’ for securities with settlement cycle as T+2," the BSE said in an earlier communication on September 24.

Trading members and vendors have been asked to make necessary changes to their trading application.

Testing of the scrips file to be included in T+1 settlement shall be made available from 1st November 2021 in a simulation environment, the BSE said.