March 12, 2024 / 02:08 PM IST
Sensex Today | Rakeshh Mehta, Chairman of Mehta Group-Mehta Equities
A move by regulators towards same-day settlement, or T+0, in the Indian stock market represents a significant advancement towards enhancing the market’s dynamism and efficiency. This initiative, aimed at aligning with global financial market standards, is under exploration and holds the promise of bringing about instantaneous trade settlements.
Such a transition is believed to offer numerous benefits, notably in the reduction of counterparty risk and the bolstering of market efficiency through the swift exchange of funds and securities between buyers and sellers. Furthermore, it is anticipated to substantially lower operational expenses for market participants and reduce the funding costs that brokers face.
Despite these advantages, the shift towards a T+0 settlement cycle is not without its challenges. Implementing this change would necessitate a comprehensive overhaul of the current market infrastructure, systems, and processes, entailing complex and potentially costly modifications to be made promptly.
Additionally, there is a concern that a shorter settlement cycle might contribute to an increase in market volatility. In essence, while the proposed move towards a T+0 settlement cycle stands to significantly benefit the Indian stock market by enhancing its efficiency and reducing risks and costs, it also demands careful consideration of the complexities and potential drawbacks involved in its implementation.