SEBI Plans For a One-Hour Trade Settlement. What Is The One-Hour Trade Settlement?

Sep 07, 2023 09:22 AM Merolagani

The Securities and Exchange Board of India is all set to launch the one-hour trade settlement. Here is a quick introduction to the same.

What is the One-Hour Trade Settlement?

In July, the Securities and Exchange Board of India (SEBI) declared that it was actually trying to bring forward real-time settlement of trades. Now, the Board is all set to execute a one-hour settlement of trades.

SEBI aims to bring forward the one-hour settlement of trades by the month of March in the upcoming year, as expressed on Tuesday by Madhabi Puri Buch, SEBI's chairperson. The chairperson also stated that the Application Supported by Blocked Amount (ASBA)-like feature for trading in the secondary market is likely to be brought forward in the month of January in the upcoming year.

Understanding the trade settlement

Settlements comprise a two-way procedure. Such a process encompasses the transfer of securities and funds on the date of settlement. Only when the purchased securities of a listed company are actually delivered to the buyer and the seller in return receive the money, is the time when a trade settlement is said to be completed successfully.

The present T+1 cycle implies settlements associated with trade occur within 24 hours of the actual transactions. It was in January 2023 that the migration to the T+1 cycle took place. India successfully became the second nation in the world to kickstart the T+1 settlement cycle in the top-listed securities. The first nation to do so in the world is China. The cycle brings in quicker fund remittances, operational efficiency, and ease for stock market participants, and operational efficiency.

SEBI's words

Buc expresses that the one-hour trade settlement is believed to be much faster to implement than instantaneous. Therefore, in case the instantaneous takes another 6 to 7 months, the body will be implementing a one-hour trade settlement prior to that.

While the technology required for the implementation of a one-hour trade settlement is present, the system requires additional technology development in case of instantaneous trade settlement, which would further require additional time. The instantaneous trade settlement is expected to be launched by the end of the year 2024.

Advantages of the one-hour trade settlement

As per the present T+1 settlement cycle, in case an investor sells the securities, the money gets credited into the account of the individual the very next day. In case of a one-hour settlement, in case an investor sells a share, it is in an hour that the money will be credited to their account. This means that the buyer will be receiving the shares in the demat account within an hour's duration. (Jagaran Josh)

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