India bluechips to shift to world’s fastest settlement cycle T+1 this week: Report

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Shares of about 200 of India’s biggest listed companies are set to move to a faster settlement cycle, making the South Asian nation the second market after China to switch to the so-called T+1 system, Business Standard said, citing Bloomberg.

As per the report, starting January 27, stocks from Reliance Industries to Tata Consultancy Services and Adani Enterprises — together comprising 80 percent of the country’s equity market — will be settled on a ‘trade-plus-one-day’ timeline versus the earlier two-day process. The yearlong changeover gave market intermediaries time to prepare, said Prashant Vagal, executive vice president at National Securities Depository, according to the report.

This last step in the transition will be closely watched by foreign investors who have expressed concern over timezone differences and consequent trade-matching failures, said the report, adding that supporters of the move say faster settlement reduces counterparty risk and trading costs.

The shift will boost operational efficiency as the rolling of funds and stocks will be faster, Suresh Shukla, joint president at Kotak Securities, told Bloomberg, the report said.

The US Securities And Exchange Commission has also sought stakeholder views on moving to a one-day settlement cycle and an industry body in Europe is discussing the same, said the report.

“Shortening the settlement cycle should reduce the amount of margin that counterparties would need to post with clearinghouses,” said SEC Chair Gary Gensler, as per the report citing Bloomberg. “As the old saying goes, time is money.”

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