Working on one-hour & ‘instantaneous’ settlement of trade: SEBI chief

After moving to T-1 trade settlement, market regulator Securities and Exchange Board of India (SEBI) may soon move to one-hour trade settlement, and then eventually to "instantaneous" settlement, says SEBI Chairperson Madhabi Puri Buch at the Global Fintech Fest 2023.

"From T+2 settlement, we have moved to T+1. India is the first jurisdiction in the world that has moved to T+1 (trade date plus one day) settlement. We are now talking about a one-hour settlement," the SEBI chief says, adding "one-hour settlement" will be a crucial step towards the "instantaneous settlement" of trade.

SEBI has been receiving requests from various stakeholders to further shorten the settlement cycle further. The regulator is also in discussions with market infrastructure institutions on this issue.

The SEBI chief did not give the exact timeline on when this will be implemented, though market experts believe a one-hour settlement cycle may be reality by March 2024 and an "instant settlement" within the following six months.

The current statement of the SEBI chief affirms her remarks made in July 2023, in which she said the regulator was engaged with the ecosystem to settle payments in real-time.

"We believe that in the not very far future, we will have a mechanism which will facilitate instantaneous settlements on the stock exchange," Buch said.

The SEBI chief said India was the first major economy that has moved into T+1 settlement for all its scrips, and the immediate impact on a conservative basis is that almost ₹10,000 crore of margin has been released back into the system.

In January 2022, SEBI shortened the settlement cycle (time taken between selling shares and receiving cash or buying shares and receiving Demat shares) to T+1 (trading day plus one day) from the traditional T+2 settlement cycle, making it the world’s first watchdog to implement such a rule.

As per the current norms, after opting for the T+1 settlement cycle for a scrip, the stock exchange must mandatorily continue with the same for a minimum period of 6 months. Thereafter, in case, the stock exchange intends to switch back to the T+2 settlement cycle, it must be done by giving 1-month advance notice to the market.

In a separate development, SEBI, while tightening the noose around the unregulated 'finfluencers' in India, has proposed to restrict the association of registered entities with such financial influencers and has also proposed a unique fee payment platform for registered investment advisers or research analysts.

The latest SEBI proposal comes via a consultation paper, which has been released more than a month after Fortune India reported about reluctance on the part of 'finfluencers' to register themselves with regulators, and how this burgeoning tribe of self-proclaimed financial experts is plaguing the internet.

As per SEBI, in recent times, the activities of ‘finfluencers’ have attracted wide public and media attention. They are usually unregistered entities, providing "catchy content, information, and advice on various financial topics to their several followers”.