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T+1 settlement cycle
January 30 , 2023
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- India transitioned to a market-wide Transaction+1 (T+1) settlement system for equities from the previous T+2 cycle.
- The new system was first introduced by market regulator, the Securities and Exchange Board of India (Sebi), in 2021
- It has been implemented phase wise starting from smallest companies by market capitalisation to larger ones.
- It has become the second largest market after China to have made the transition ahead of the U.S., Europe and Japan which adhere to the T+2 settlement cycle.
- A trade involves three important functions, execution of trade, clearing and settlement, carried out by separate entities.
- It is represented using ‘T’, that is, trade executed on a particular day.
- Since clearing used to take place the next day followed by another day for settlement, the previous mechanism was defined as ‘T+2’.
- From now onwards, the settlement will be done the next day itself, thus, T+1.
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