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News: SEBI chief has said that instant settlement of trades is in the works.
What is T+0 settlement?
• T+0 settlement is a term that refers to the process of settling trades in the stock market on the same day as the trade date. This means that the buyers and sellers of securities will receive or deliver their shares and money instantly, without any delay.
• T+0 settlement is different from the current T+1 settlement cycle, which takes one day after the trade date, or the previous T+2 settlement cycle, which took two days after the trade date.
Benefits of T+0 settlement:
• Reduced counterparty risk - T+0 settlement will reduce the risk of default or failure by either party to honour their obligations, as the transactions will be completed on the same day.
• Increased liquidity - T+0 settlement will increase the availability of funds and securities for trading, as the investors will be able to use their money and shares immediately after selling or buying them.
• Enhanced investor confidence - T+0 settlement will enhance the confidence and trust of investors in the stock market, as they will receive instant confirmation and delivery of their trades.