T+1 Settlement of Securities | What’s changing for your delivery trades on Jan 25

Change in Settlement Cycle to T+1 by SEBI from January

The Indian stock markets are shifting to a shorter trading cycle, T+1 settlement, on January 27. On 21st Sep 2021, the Securities and Exchange Board of India (SEBI) introduced a next-day rolling settlement or T+1 settlement. Since then, SEBI had started migrating stocks to T+1 settlement in a phased manner starting with the bottom 100 stocks by market cap. On January 27, all the large-cap and blue-chip stocks will move to the T+1 system, completing the migration. In the derivatives segment, all the stocks will be migrated to the T+1 settlement in one shot.

What is a settlement cycle? What is changing?

 The settlement cycle is the time taken for a trade to be settled- that is when the transfer of securities or funds is completed to your account. The settlement cycle is said to be completed only when the buyer receives the shares and the seller receives the money.

Currently, the market follows the T+2 settlement system. Under this, when you buy or sell a stock, you get your shares and funds in the Demat account on the third working day. This includes the day of trade as well. This change would allow you to get shares in your account one day after you have bought them. On selling these securities, you will also get the money in your account one day after the trade.

How does this impact you?

A shorter settlement cycle means you get your funds 1 day earlier on is increasing your freedom to trade, as your funds will roll faster into your accounts. It also helps minimise the risks, increasing liquidity, and protecting investors’ interests. 

But the transition is coming with a minor inconvenience. As part of this process, a stock that is bought one day before the transition takes place (25th Jan 2023) will be blocked from selling the next day. While this will not affect intraday traders, investors taking stock delivery will be impacted.

If you purchase the stocks which are being transitioned on 27th Jan on 25th Jan (See full list below). Your stocks purchased, can not be sold on 27th Jan 2023 due to this transition. These stocks will be unblocked for trading on the next trading day (30th Jan)

List of Securities for T+1 Settlement on 27-Jan-2023

Also Read: Change in Settlement Cycle to T+1