In news- The Securities and Exchange Board of India has proposed a ‘Trade-plus-one’ (T+1) settlement cycle from January 1, 2022 where the trades will get settled the day after the transaction.
About T+1 system-
- Under the T+1 rule, stock transactions will be settled on the very next day and not after two days as is the current norm (T+2 settlement cycle).
- This means that, in case of share purchases, the shares will be credited into the demat account a day after the trade day.
- The step will make India among a handful of countries that have adopted the shorter settlement cycle.
- The stock exchanges may choose to offer the T+1 settlement cycle on any of the stocks, after giving a notice of at least one month on the change to all stakeholders.
- After opting for the T+1 cycle, the stock exchange must continue with it for a minimum of six months.
- Hence any subsequent switch (from T+1 to T+2 or vice versa) shall be subject to a minimum period and notice period.
- The new settlement option would be applicable to all types of transactions (regular as well as block deals) in the chosen security on that stock exchange.
Most global markets follow the T+2 settlement process and India switched to T+2 from T+3 in 2003. The shortened settlement cycle has been opposed by foreign portfolio investors (FPIs) due to time-zone differences and an increase in operational cost.