Continuing its focus on implementing advanced digital infrastructure into its financial and banking systems, India in March became the first among the world’s major financial markets to implement T+0 settlement on its stock exchanges. Stock trades will now be settled on the same day they were made.
The T+0 standard will initially apply to 25 large-cap blue-chip stocks and will be extended to the rest of the market if results are satisfactory. The faster settlement cycle is a step forward from the previous one-day settlement system in India. Indian exchanges started T+1 in 2021 with a similar phased implementation starting with blue chips and was fully implemented by early 2023.
US exchanges are moving to T+1 from the T+2 cycle. Even as India moves towards same-day settlement, Indian regulators, exchanges and clearing houses have already started moving ahead. Real-time calculations are expected to be beta tested next year. Previously, Indian exchanges were among the first to switch to T+2 in 2003; the eurozone followed suit only in October 2014, and the United States in 2017. The EU and UK are still considering the possibility of switching to T+1, the exact date has not been announced.
“Digitalization is a major driver of rapid progress in India’s equity and derivatives infrastructure,” says Vishal Aunchaliya, a former head of the National Stock Exchange of India who advised on resolution projects. “To enable this evolution of the settlement system, a sophisticated payments infrastructure is required.” Key to fueling India’s quest for faster and ultimately real-time settlements is the lightning speed at which banking transactions are completed in India. Transfers from client accounts to brokerage accounts are instantaneous, meaning clients have the means to initiate trades the moment they transfer money, rather than two or three days later, as remains the norm elsewhere.