Securities and Exchange Board of India (SEBI)<\/strong> has introduced T+1 (Trade plus 1 day) settlement cycle for stocks on an optional basis <\/span>in place of T+2 settlement. <\/span>The new rule will come into force on January 1,2022.<\/span><\/p>\n T+1 (T+2) are abbreviations that refer to the settlement date of security transactions<\/strong>. The “T<\/strong>” stands for transaction date<\/strong>, which is the day the transaction takes place.<\/span><\/p>\n T+1 means settlements will have to be cleared within one day<\/strong> after the actual transaction takes place. This means the <\/span>trades executed on Monday gets settled on Tuesday, the next working day.<\/span><\/p>\n On the other hand, T+2<\/strong> means if an investor sells shares on Tuesday, settlement of the trade takes place in two working days<\/strong> (T+2). The broker who handles the trade will get the money on Thursday, but will credit the amount in the investor\u2019s account only by Friday. In effect, the investor will get the money only after three days.<\/span><\/p>\n Firstly, a shortened cycle not only reduces settlement time<\/strong>\u00a0but also reduces and frees up the capital required<\/strong> to collateralise that risk.<\/span><\/p>\n Secondly, it\u00a0<\/span>will provide liquidity to the investors<\/strong> as they get their funds for the shares sold\/ credited to their account earlier.\u00a0<\/span><\/p>\n Thirdly, it\u00a0reduces the number of outstanding unsettled trades<\/strong> at any instant, and thus decreases the unsettled exposure to Clearing Corporation by 50%.\u00a0<\/span><\/p>\n Lastly, a shortened settlement cycle will also help in reducing systemic risk<\/strong>.<\/p>\n What are the concerns associated with T+1 trade?<\/b><\/p>\n Foreign investors have raised concerns as they would <\/span>face issues while operating from different geographies<\/strong> \u2014 time zones, information flow process and foreign exchange problems.<\/span><\/p>\n Source:<\/b> This post is based on the article <\/span>\u201cT+1 settlement system: how it works, and how it will help investors\u201d<\/b> published in<\/span> Indian Express <\/b>on <\/span>13th September 2021.<\/b><\/p>\n","protected":false},"excerpt":{"rendered":" What is the News?\u00a0 Securities and Exchange Board of India (SEBI) has introduced T+1 (Trade plus 1 day) settlement cycle for stocks on an optional basis in place of T+2 settlement. The new rule will come into force on January 1,2022. What is a T+1, T+2 Settlement? T+1 (T+2) are abbreviations that refer to the… Continue reading T+1 settlement system: how it works, and how it will help investors<\/span><\/a><\/p>\n","protected":false},"author":10317,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1566,3127,9],"tags":[9157,8254,9470,9724],"class_list":["post-133758","post","type-post","status-publish","format-standard","hentry","category-daily-factly-articles","category-economy","category-public","tag-financial-instruments","tag-financial-market","tag-stock-exchange","tag-t1-settlement-system","entry"],"jetpack_featured_media_url":"","views":{"total":2,"cached_at":"","cached_date":1700578160},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/133758","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10317"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=133758"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/133758\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=133758"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=133758"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=133758"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}What is a T+1, T+2 Settlement?<\/b><\/h5>\n
What are the benefits of T+1 Settlement?<\/b><\/h5>\n