New Delhi: Stock exchanges and other market infrastructure institutions on Monday came out with a roadmap for the implementation of the T+1 (trading plus one day) settlement cycle, under which the mechanism will be introduced in a phased manner from February 25.
T+1 means that the settlement relating to market trade has to be approved within one day of the actual transaction taking place. Currently, trades on Indian stock exchanges are settled within two working days after the transaction (T+2).
The settlement cycle will be implemented in a phased manner and will be applicable to only the bottom 100 companies from February 25, and from March 2022, the next bottom 500 stocks will be available for T+1 settlement, according to a joint statement.
This decision is taken by Market Infrastructure Institutions or MIIs – Stock Exchanges, Clearing Corporations and Depositories.
This comes after markets regulator SEBI in September allowed stock exchanges to initiate T+1 settlement cycle from January 1, 2022, on any securities available in the equity segment.
According to the statement, all the listed shares on the stock exchanges (BSE, NSE and MSEI) will be ranked in descending order on the basis of average daily market capitalization for the month of October 2021.
Where a stock is listed on multiple exchanges, the market capitalization will be calculated on the basis of the stock price on the stock exchange with the highest trading volume during the reporting period.
The list of stocks and exchanges where they are available for trading will be published on the websites of all the exchanges.
Based on the ranking arrived at, the bottom 100 stocks will be available for T+1 settlement beginning February 25, 2022.
Thereafter, from March 2022, on the last Friday (trading day) of every month, the next bottom 500 stocks from the list of ranked stocks will be available for introduction of T+1 settlement.
If Friday is a business holiday, it will be implemented immediately on the next business day.
Any new stock to be listed after October 2021 will be added to the list on the basis of market capitalization calculated on the basis of the average trading price 30 days after the commencement of trading.
In case, based on market capitalization, if the stock already falls under the category of stock (in terms of market capitalization) under T+1 settlement, then that stock also becomes eligible for T+1 settlement and The T+1 settlement will be offered in the cycle on the last Friday (trading day) of the following month.
This will also be applicable to new stock getting listed due to Initial Public Offering (IPO), corporate action or any other reason and the date of transition will be announced jointly by all the exchanges on which the stock is available for trading.
Securities such as preference shares, warrants, rights rights, partially paid-up shares and securities issued under Differential Voting Rights (DVRs) will be transferred to T+1 settlement along with the parent company’s stock.
In addition, more than 5,000 securities listed by the exchanges in the equity segment of the exchanges will be converted into a T+1 settlement cycle with the last scheduled batch of securities being decided by the exchanges.
Any security that is listed after the trading date of the last scheduled batch of securities based on the ranking will be offered directly with a T+1 settlement cycle.
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