Markets regulator Sebi is working on a mechanism for instant settlement of trades, called T+0 system (see graphic) , in the stock market, a process that would be faster than the current system of settlement one day after the day of trade (T+1), said Sebi chairperson Madhabi PuriBuch on Monday.
“India is the first major economy that moved into T+1 settlement for all its scrips,” Sebi chief said. The move also helped free about Rs 10,000 crore of extra money (margin) into the system for investors, she said. Therehave been several related benefits for the whole stock market ecosystem because of the quick settlement decision, she said.
Globally, most developed markets work on a T+2 system while India is one of the leaders in T+1 system that was fully implemented in late January this year. According to market players, a highly developed payment mechanism and an evolved stock transfer process by depositories in India would facilitate instant settlement.
The Sebi chief also said technology has helped in expediting the IPO approval process, debt issuances, and nods to mutual fund housesfor new schemes. For example, earlier at one point, approvals for about 175 schemes were pending with Sebi. Now it’s down to six, and four out of those six are under a month old. “Now…practically there’s no wait time at all,” she said. Such expeditious process for approvals of various offers has accrued benefits to the investor community which is estimated to be about Rs 3,500 crore per year.
The regulator also said that it may allow the delisting of stocks at a fixed price, instead of the current system of reverse book-building mechanism. Under the current mechanism, during a delisting offer, shareholders are allowed to place their bids at the price at which they are willing to let go of their shares. Sebi would release a discussion paper on the same and invite comments from shareholders on this, she said.