Stock exchanges, clearing corps, depositories introduce roadmap for T+1 settlement cycle in equity market

The Securities and Exchange Board of India (SEBI) has permitted stock exchanges to introduce a T+1 settlement cycle from January 1, 2022, on securities in the equity segment. For that, Market Infrastructure Institutions (MIIs) such as stock exchanges, clearing corporations and depositories have finalised the roadmap for the implementation of the T+1 settlement cycle.

Under the T+1 settlement rule, trade concludes in one day and the trader will get the money the very next day.

As per the schedule of securities to be transitioned to the T+1 settlement cycle, all listed stocks, across stock exchanges, will be ranked in a descending order based on daily market capitalisation (m-cap) averaged for October 2021.

Where stock is listed on multiple exchanges, the m-cap will be calculated based on the price of the stock at the exchange, with the highest trading volume during the above-mentioned period.

The list of stocks and exchanges, where they are available for trading, will be published on the website of all exchanges. Based on the arrived ranking, the bottom 100 stocks will be available for the introduction of the T+1 settlement from February 25, 2022.

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From March 2022, on the last Friday of every month, the next bottom 500 stocks will be available for the introduction of the T+1 settlement. Thereafter, on the last Friday of every month, the next bottom 500 stocks will be available for the T+1 settlement.

In case Friday is a trading holiday, it will be introduced on the immediate next trading day. New stocks listed after October 2021 will be added to the list based on the m-cap calculated on the average trading price of 30 days after start of trading.

In case, if the stock, based on market capitalisation, already falls under the T+1 category, it'll be introduced in the T+1 cycle on the last Friday of next month. For new stocks listings on account of IPO, corporate action or other reasons, the date of transition will be announced jointly by all exchanges on which the stock is available for trading.

Preference shares, warrants, right entitlements, partly paid shares and securities under differential voting rights will be transitioned to T+1 settlement, along with the stock of the parent company.

All other securities listed such as close-ended mutual fund schemes, debt securities (corporate bonds), sovereign gold bonds, g-sec, treasury bill and state development loan, real estate investment trusts, infrastructure trusts and other existing securities, will be transitioned to the T+1 settlement cycle along with the last scheduled batch of securities.

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