Markets regulator Sebi on Friday proposed concurrent presence of the current T+1 settlement system in the stock market along with the proposed T+0 settlement system, to be replaced by an instant settlement system in a few months. To arrest any price distortion that may arise between the two settlement systems, Sebi also proposed a price band of plus/minus 100 basis points (100bps = 1 percentage point) for the same stock when traded under the two different settlement systems.

It floated a consultation paper which said that investors on Dalal Street will have the option to choose under which of the two – T+1 and T+0/instant settlement – cycles they would put their trade.

Under the current T+1 settlement system, the buyers and the sellers of stocks get their stocks in the demat account and the money in their bank accounts a day after the day of trade. Under the T+0 (same day) settlement system, they will get their stocks and funds at the end of the day they put in their trades. And under the instant (real time) settlement system, each trade will be settled as quickly as possible. Once the T+0 and instant settlements are implemented, India would be the first country to move into such a stock trading process.

Sebi’s consultation paper asked people to send in their comments and suggestions to the regulator by January 12, 2024. The main driver for Sebi’s push towards faster settlement seems to be the fact that on an average, every day over 90% of the delivery-based trades with value of up to Rs 1 lakh are by investors who prefer to put up funds and stocks even before they trade. In market jargon it’s called ‘early pay-in’ or EPI.