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Economy
Mahesh

08/09/23 06:38 AM IST

One-hour trade settlement

In News
  • Securities and Exchange Board of India (SEBI), which had in July announced it was working to launch real-time settlement of trades, is now planning to implement one-hour settlement of trades first.
Trade settlement
  • Trade settlement is a critical process in the financial markets that involves the transfer of funds and securities between parties involved in a trade.
  • It ensures that the buyer receives the purchased securities, and the seller receives the agreed-upon funds.
  • In the context of securities trading, this settlement process finalizes the transaction.
T+1 Settlement Cycle
  • In January 2023, India adopted the T+1 settlement cycle, where T represents the trade date.
  • This means that trade-related settlements occur within one business day or 24 hours of the actual transaction.
  • India became the second country, after China, to implement the T+1 settlement cycle in top-listed securities.
  • This transition brought several advantages, including increased operational efficiency, faster fund transfers, prompt share delivery, and improved convenience for participants in the stock market.
Benefits
  • Under the current T+1 settlement cycle, if an investor sells securities, the money gets credited into the person’s account the next day.
  • In one-hour settlement, if an investor sells a share, the money will be credited to their account in an hour, and the buyer will get the shares in their demat account within an hour.
  • Reducing the settlement time can mitigate counterparty and market risk, enhancing overall market stability.
  • Investors will appreciate the swifter access to their funds and securities, making the market more user-friendly.
Source- Indian Express

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