Instant settlement on the stock market.
Technology for one-hour trading schemes already exists and the regulator is confident, an official says
Market regulator Sebi will introduce one-hour trading agreements by the end of this fiscal year, ahead of making such processes instantaneous. PTI report quoting a senior official. The official clarified that faster settlements are optional and investors can opt out, amid concerns from certain foreign portfolio investors about the shortening of settlement cycles, citing forex-related concerns.
The Securities and Exchange Board of India (Sebi) has adopted a roadmap to achieve its goal of bringing about trade deals in no time, the official told reporters, according to the PTI report. “From one day to one hour to immediately is the roadmap,” the official said, adding that one-hour settlements can be implemented much faster than instantaneous.
The official said the technology for one-hour trade agreements already exists and the regulator is confident in it, while the immediate arrangements require more technological development.
Currently, Sebi is thinking about rolling out the one-hour trading scheme to all investors by March next year, and is looking forward to a six- to eight-month window for the immediate settlement, the official said.
The Application Supported by Blocked Amount (ASBA)-like facility for secondary markets will launch for all investors in January, and it will be several months after that before the hour-long cycle begins, the official said.
Responding to investor concerns, the official said the early settlement facility will be optional for investors and they can opt out of it. He stressed that data analysis does not point to problems on the trading side if some investors opted out.
“If the FPIs don’t (currently) want to do that, they are free to do so. And we looked at the matching data (about) whose trade matches who. So our belief based on that data is that it won’t be a problem for anyone,” the official said.
Building on the recently released proposals to address the threat of financial influencers, the official said Sebi is acting with an eye to the future and it only intends to get into a situation if a regulated entity enters the picture.
In addition, the market regulator also monitors activities with the help of state law enforcement agencies, the official said.
In July, Sebi chairman Madhabi Puri Buch said that India is the first major economy to move to T+1 for all stocks and that this is groundbreaking. She also said that the capital markets regulator is working on immediate transaction settlement in the stock markets.
The Indian stock market completely switched to a shorter (T+1) trading cycle from January 27, making the country the first country in the world to do so. Previously, the domestic stock market followed the T+2 settlement cycle, which means that if you buy a stock on Monday, it will be credited to your demat account on Wednesday (T+2). The T+1 trade settlement system allows investors to get the shares into their demat accounts from January 27 and sell them the next day (Tuesday in this case).