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T+1 Settlement

T+1 Settlement:

After China, India will become the second country in the world to start the ‘trade-plus-one’ (T+1) settlement cycle in top-listed securities.

  • In simple terms, T+1 settlement means that securities transactions will reflect in the demat account after a day instead of two days now under the T+2 cycle.
  • If an investor buys a stock on Thursday, it would be shown in the demat account on Friday.
  • It Reduces risks and frees up capital required to collateralise the risk and reduces the number of outstanding unsettled trades at any point in time
  • Foreign investors operate from different geographies leading to time zone differences, information flow processes, and foreign exchange problems.
  • Foreign investors said they would also find it difficult to hedge their net India exposure in dollar terms at the end of the day under the T+1 system.
  • The United States, United Kingdom and Eurozone markets are yet to move to the T+1 system