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T+0 settlement implemented in India’s share market: Find its benefits

Indian stock exchanges have started the implementation of a T+0 (T Plus Zero) settlement system in the share market enabling traders to get the cash for the shares they sell on the very transaction day. Securities and Exchange Board of India (SEBI), the Indian stock market regulator will assess its effect in 6 months to determine future plans. Let’s find out what T+0 is and how it adds value to the share market.

BSE has debuted T plus zero for 20 scrips for settlement cycles. For this settlement system, stocks of Ambuja Cement, Bajaj Auto, Bank of Baroda, etc. have been declared eligible. Earlier, SEBI had issued the framework for T+0 for settlement leading to BSE implementing it. Currently, it’s functioning in a beta form.

It’s said that the T+0 will work along with the currently implemented T+1 settlement cycle. Under the T+1 system, sellers get up to 80% cash on the day of the share transaction. The 20% can be had the following day. But with the T+0 settlement, sellers will get their hands on 100% of their cash on the same day of selling the shares in the world’s top 5 share market.

What is T+0 in share market?

The T+0 refers to the same-day transaction settlement. In the first phase, the same-day settlement is carried out after which buyers get their shares the very day, and also the amount is deposited into the seller’s account. Settlements are not done during the holidays.

The settlement system has garnered praise from industry analysts. “I feel this could be highly beneficial to retailers who come with limited cash into the market, and this would revolutionize the trading landscape for the same small investors. Shortening of the settlement cycle means optimal utilization of funds to make best-in-time returns to swing traders,” said Prashanth Tapse, Research Analyst, Sr VP Research of Mehta Equities.

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In Nepal, too, the T+0 settlement cycle would bring huge benefits. Presently, sellers need to wait days to get the payment for the shares they sell into their account. It’s one of the inconveniences faced by Nepali share traders while the experience might vary among the sellers. But the T+0 in Nepal or something similar that guarantees the same-day transaction settlement could be a nice introduction for the entire stock market.

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