SEBI’s T+0 Leap: A Game-Changer for Stock Trading

Imagine buying a stock and seeing it appear in your demat account on the same day. That’s the simplicity and speed that SEBI is bringing to the Indian stock market by expanding the optional T+0 (same-day) settlement cycle to the top 500 listed stocks. Scheduled to completely take effect on January 31, 2025, this phased introduction will revolutionise the settlement of trades, leading to enhanced liquidity, lower risk and efficiency of Indian markets.

What is T+0 settlement, exactly?

In a T+0 settlement, the transaction is completed the very same day. It’s faster, safer and removes the waiting period for both buyers and sellers. In simple words, it is like an instant UPI for the stock market instead of money.

How will it be implemented?

SEBI has launched this initiative in a phased manner to allow a gradual transition.

First step: From January 31, 2025, the bottom 100 companies (ranked by market capitalisation) among the 500 stocks by size will migrate to T+0 settlement cycle.

Every month, 100 more will join the T+0 bracket. All 500 companies will have the option for same-day settlement by May 2025.

When you realise that these 500 companies account for close to 80% of India’s ₹240 lakh crore market capitalisation, this sequential approach makes sense.

SEBI is rolling out this initiative in phases to ensure a smooth transition:

Step 1: Starting January 31, 2025, the bottom 100 companies (by market capitalisation) in the top 500 stocks will switch to the T+0 settlement cycle.

Step 2: Every month, another 100 companies will be added to the T+0 bracket. By May 2025, all 500 companies will have the option for same-day settlement.

This phased approach makes sense when you consider that these 500 companies represent nearly 80% of India’s ₹240 lakh crore market capitalisation. It’s a staggered yet bold move to modernise the market.

Why should you care?

This isn’t just a backend change for brokers—it impacts every investor. Here’s how it benefits everyone:

Quicker Access to Money: With T+0 settlements, you’ll get your funds or shares the same day you trade, making it easier to reinvest or withdraw.

Lower Risk: Shorter settlement cycles reduce the chances of defaults by traders or brokers, making the market safer.

More Investors, More Liquidity: Faster settlements could attract both retail and institutional investors, increasing trading volumes and improving market liquidity.

Streamlined Operations: Brokers, clearing corporations, and depositories will benefit from reduced complexities in trade processing.

But it’s not all smooth sailing!

Implementing T+0 isn’t as simple as flipping a switch. There are challenges:

Tech Readiness: Real-time settlement requires robust IT infrastructure. Smaller brokers might find it tough to invest in upgrades.

Operational Changes: Every participant in the ecosystem—from traders to clearing houses—needs to adapt to this faster cycle.

Cost Concerns: The initial investment for system upgrades and training could be significant, particularly for smaller players.

The bigger picture

India has been steadily moving towards market efficiency. In January 2023, it became one of the first major markets to implement T+1 settlement for all stocks. Now, with T+0 on the horizon, India is setting a benchmark globally. Few markets have dared to attempt same-day settlements on such a large scale, putting India at the forefront of market innovation.

This change is especially significant for high-frequency traders and short-term investors, who thrive on speed and quick turnarounds. It’s also a big win for international investors who value efficiency and reduced risk.

Source: Google, SEBI circular

Disclaimer: This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Please read the SEBI-prescribed Combined Risk Disclosure Document before investing. Brokerage will not exceed SEBI’s prescribed limit.