The Securities and Exchange Board of India (SEBI) is advancing its plans to introduce one-hour trade settlements by the end of the current fiscal year. This move is part of SEBI’s roadmap to eventually achieve instantaneous trade settlements in the Indian capital markets.
SEBI aims to roll out one-hour trade settlements for all investors by March next year, with a longer timeframe of 6-8 months envisioned for the transition to instantaneous settlements. The regulator’s strategy involves progressing from the current one-day settlement cycle to one-hour settlements and then achieving instantaneous settlements.
According to an official, one-hour settlements are expected to be implemented more swiftly than instantaneous settlements. The necessary technology for one-hour trade settlements is already available, and SEBI is confident in its feasibility. In contrast, instantaneous settlements require additional technology development.
SEBI is also planning to introduce an Application Supported by Blocked Amount (ASBA)-like facility for secondary markets by January, making it accessible to all investors. Following this implementation, it will take a few more months for the one-hour trade settlement cycle to be fully established.
To address concerns raised by certain foreign portfolio investors (FPIs) regarding shorter settlement cycles, SEBI has emphasized that faster settlements will be optional for investors. Investors can choose whether or not to participate in the one-hour settlement process.
The official emphasized that data analysis has not indicated any significant issues on the trading side if some investors were to opt out of instantaneous settlements. FPIs have the freedom to opt out of instantaneous settlements if they wish to do so.
SEBI’s move toward shorter settlement cycles is part of its ongoing efforts to modernize and streamline India’s capital markets. The introduction of one-hour trade settlements will likely bring greater efficiency and agility to the Indian financial markets, benefiting both investors and market participants.
While the shift to one-hour settlements and, eventually, instantaneous settlements represents a significant advancement in India’s financial infrastructure, SEBI is taking a measured approach to ensure that the transition is smooth and accommodates the preferences of market participants, including foreign investors.