“Breaking: BSE Unveils 25 Hot Stocks Eligible for Lightning-Fast T+0 Settlement!”

Bombay Stock Exchange (BSE) recently announced a significant change in the case of 25 selected stocks that will now be part of an optional T+0 settlement cycle starting from March 28, 2024. This means that trades for these specific stocks will be settled within the same day as opposed to the normal T+2 cycle. Additionally, BSE has disclosed that some notable companies such as Bajaj Auto, Ambuja Cements, Cipla, SBI along with three Tata Group stocks are among the eligible scrips for this T+0 settlement cycle.

Until now Indian markets have operated on a T+1 settlement cycle for all stocks where transactions reflect in investors’ demat accounts next day after trade. A draft framework on voluntary basis for T+0 came out earlier this month by SEBI.

At first, this choice of action will only be available to investors of a limited pool of 25 scrips and through some few brokers. This is complementary to the existing T+1 settlement cycle applicable in equity cash market operations. In this regard Sebi argues that shortening the settlement period would lead improve cost and time efficiency, facilitate transparency about charges imposed on investors as well as strengthen risk management across clearing corporations and the securities market ecosystem.

Here’s the list presented of 25 scrips:

Sebi’s move to T+0 settlement is part of its efforts to be responsive to changes and achieve its mandate of developing the securities markets and ensuring investor protection. Previously, this was reduced from T+5 to T+3 by Sebi in 2002 and then again changed to T+2 in 2003.

All investors will participate in the T+0 settlement cycle provided they comply with stipulated time lines, processes and risk requirements as determined by market infrastructure institutions. The trading hours are as follows; 09:15 AM TO 01:30 PM, while prices in the T+0 segment shall be within a price range of +100 basis points above or below those in the regular T+1 market. This band will be adjusted after every 50 basis points movement in the underlying numbers in the regular market (T1). Additionally, surveillance measures that apply for scrips under T+1 settlement cycle are applicable on scrips under T0 settlement cycle.

However, note that index calculation and settlement price computation shall not include prices of trades executed under a T+0 regime as well as no separate closing price for securities based on trading on the exchange system during an intraday session.

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What is T+0 Settlement?

In the traditional T+2 settlement cycle (T representing trade), trades are settled after two working days from the trade date one. This implies that if for instance you purchase a stock today, it will take an additional two business days for you to have them delivered and receive payment. The second alternative is T+0 settlement. For shares in these particular stocks, both delivery and settlement occur within a day. In this way, the waiting period of 2 days is removed and money becomes available more rapidly to both purchasers and sellers.

BSE’s T+0 Beta List

Included in this beta phase of optional T+0 settlement by Bombay Stock Exchange are twenty five major stocks. These companies vary across the sectors having large-cap, mid-cap and some small cap ones. Some of them include:

• Large-cap: Bajaj Auto, SBI, Cipla, Nestle India, ONGC
• Mid-cap: Ashok Leyland, JSW Steel, LTIMindtree, MRF, Vedanta
• Small-cap: Birlasoft, Coforge, Divi’s Laboratories, Trent

Benefits and Considerations:

The introduction of T+0 settlement, where trades are settled on the same day rather than the usual T+2 cycle, comes with potential benefits and considerations. On the positive side, it promises increased market efficiency and reduced counterparty risk due to faster settlement. Investors can also enjoy greater flexibility as funds are freed up quicker for further trades. However, there are also concerns, such as the possibility of heightened short-term volatility and the necessity for robust technology infrastructure to support seamless settlement. Moreover, investor awareness is crucial to understand the implications of T+0 trading. It’s important to note that participation in T+0 settlement is currently optional, allowing brokers and investors to choose between T+0 and traditional T+2 settlement for specific stocks. This beta phase will enable assessment of T+0 settlement’s effectiveness before potential broader implementation.

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