SEBI introduces same-day settlement for top 500 stocks with optional T+0 settlement cycle

The Securities and Exchange Board of India (SEBI) on Tuesday announced that the top 500 stocks by market capitalisation will be eligible for the same-day settlement cycle (Trade Date 0) in a phased manner. At present, only 25 stocks are available for the T 0 settlement. In a circular, the markets regulator announced that T 0 settlement option would commence from January 31, 2025.

What is T 0 settlement?

SEBI has approved the expansion of the T 0 settlement option for equity trades. T 0 refers to a settlement cycle in the stock market where trades and funds are settled on the same day as the transaction, instead of the traditional T 1 settlement, which means shares purchased on a particular business day is added to the client’s demat account one business day after the trade.

Increased eligible stocks

Currently, only 25 stocks are eligible for the T 0 settlement on optional basis. The beta version of the settlement cycle was launched in March this year; however, the response has been tepid. This will be expanded to include the top 500 stocks in terms of market capitalisation, in a phased manner. The scrips shall be made available for   trading   and   settlement   starting   with   scrips at bottom 100 companies and gradually include the next bottom 100 companies every month till top 500 companies are available for trading in the optional T 0 settlement cycle.

Benefits

This move is aimed at enhancing market efficiency and providing more flexibility to market participants.

• Date of calculating market capitalisation

To identify top 500 companies, the market capitalisation of the companies will be computed as of December 31 for the T 0 settlement.

• Different brokerage fee

Stock brokers are permitted to charge differential brokerage for the T 0 and T 1 settlement cycles, which means all registered stock brokers will have the opportunity to offer access to the optional T 0 settlement cycle to their clients and are permitted to charge differential brokerage fee.

• Role of qualified stock brokers

Qualified stock brokers (QSBs), or those classified as large brokers given their client size and volume managed, have been directed to put in place processes and systems for smooth implementation. A QSB is the one designated by SEBI as having a significant impact on the securities market and investors, and is required to meet certain standards to ensure the orderly functioning of the securities market and protect investors.

QSBs with a minimum number of active clients as of December 31, 2024, will be required to implement systems for seamless T 0 participation. Newly designated QSBs will have three months to comply with these requirements following any updates to the QSB list.