Daily Current Affairs : 29-March-2024
India’s stock exchanges have delivered a beta version of a same-day transaction settlement device, referred to as T+0, for select cash segment shares. This initiative seeks to improve the trading experience for investors by allowing trades to settle on the same day they occur.
Understanding T+0 Settlement
Currently, T+0 is in a limited rollout phase and is available for around 25 stocks. It is also being tested with a specific group of brokers. The purpose of this testing is to assess the system’s effectiveness and address any issues before a broader implementation.
Benefits of T+0
The T+0 settlement system offers several advantages for investors, including:
- Faster Access to Funds: Investors can access their money on the same day, allowing for quicker reinvestment.
- Increased Flexibility: With same-day settlements, investors can react swiftly to market changes.
- Reduced Counterparty Risk: This system minimizes the risk associated with unsettled trades, providing a safer trading environment.
Historical Context of Settlement Cycles
To understand the significance of T+0, it is vital to examine India’s historical settlement cycles:
- T+5: Initially, trades settled five days after the transaction.
- T+3: In 2002, the settlement cycle was reduced to three days.
- T+2: By 2003, it was further reduced to two days.
- T+1: In 2021, the Securities and Exchange Board of India (Sebi) introduced the T+1 system, which became the standard in 2023.
Current Settlement Cycle
As of now, the settlement cycle for all traded instruments on Indian exchanges is T+1 day. In this system, “T” represents the trading day, indicating that trades are settled the next day.
Important Points:
Introduction of T+0: India’s stock exchanges have launched a beta version of same-day transaction settlement, known as T+0, for select cash segment stocks.
Current Phase: T+0 is currently in a limited rollout with about 25 stocks and specific brokers to test its effectiveness.
Key Benefits of T+0:
- Faster Access to Funds: Investors can access their money on the same day, enabling quicker reinvestment.
- Increased Flexibility: Allows investors to respond swiftly to market changes.
- Reduced Counterparty Risk: Minimizes risks associated with unsettled trades, enhancing trading safety.
Historical Settlement Cycles:
- T+5: Initially, trades settled five days after the transaction.
- T+3: Reduced to three days in 2002.
- T+2: Further reduced to two days in 2003.
- T+1: Introduced in 2021 and became the standard in 2023.
Current Settlement Cycle: The standard settlement cycle for all traded instruments on Indian exchanges is T+1 day, meaning trades are settled the next day.
Why In News
India’s stock exchanges have launched a beta version of same-day transaction settlement, known as T+0, for select cash segment stocks, aiming to enhance liquidity and improve the overall trading experience for investors.
MCQs about India’s New Same-Day Transaction Settlement: T+0
-
What is the primary purpose of the T+0 settlement system introduced by India’s stock exchanges?
A. To increase trading fees
B. To allow same-day transaction settlements
C. To reduce the number of stocks traded
D. To eliminate broker involvement
-
How many stocks are currently involved in the limited rollout of the T+0 settlement system?
A. 10
B. 25
C. 50
D. 100
-
Which of the following is NOT a benefit of the T+0 settlement system?
A. Faster access to funds
B. Increased flexibility
C. Higher trading costs
D. Reduced counterparty risk
-
What was the settlement cycle in India before the introduction of the T+1 system in 2021?
A. T+3
B. T+5
C. T+2
D. T+0
Boost up your confidence by appearing our Weekly Current Affairs Multiple Choice Questions
