Ajay Tyagi, chairman of the capital markets regulator Sebi, said on Thursday that the T+1 (trade plus one day) settlement cycle is in the best interests of all market players and that the new system will not fragment liquidity.
T+1 implies that market trade-related settlements must be completed within one day of the transaction’s completion. Trades on Indian stock exchanges are now settled two working days after the transaction is completed (T+2).
“All market players will benefit from early settlement. It is in everyone’s best interests, and the new system would not result in liquidity fragmentation “In an event hosted by the Confederation of Indian Industry (CII), Tyagi remarked.
This comes as the brokers’ group expresses reservations about the shorter settlement system’s deployment.
The Securities and Exchange Board of India (Sebi) recently gave exchanges the option of switching to the T 1 settlement cycle. As of today, Sebi has made this method optional, so exchanges can choose whether to use T 1 or T 2. On January 1, 2022, the new method will be implemented.
Sebi has opted to abbreviate the settlement cycle before. The number of days in the settlement cycle had been lowered from T 5 days to T 3 days by the capital markets regulator in 2002, and subsequently to T 2 days in 2003.
According to Tyagi, the Indian markets have seen a surge in funding through initial public offerings (IPOs). Growth-oriented IT businesses have generated approximately 15,000 crores through initial public offerings (IPOs) in the previous 18 months. According to their current SEBI disclosures, they have a pipeline worth about 30,000 crores. According to him, funds collected through IPOs in the current fiscal year are nearly equivalent to the whole amount raised in the full financial year 2020-21.
Individual investor involvement in the market has risen by “leaps and bounds,” according to the Sebi chairman. According to him, around 4 lakh new demat accounts were established per month on average in 2019-20, rising to 12 lakh per month in 2020-21. During the current fiscal year 2021-22, the tendency would be amplified, with an average of 26 lakh demat accounts being established every month, he noted.