The optional shorter settlement cycle has seen a subdued response from the market and there is hardly any traction as participants are continuing with the T+1 cycle, writes Moneycontrol.
Market participants attribute the lackluster response to the fact that there is no real incentive or benefit for the investors apart from the fact that the shares or funds are credited on the day of the transaction instead of next day. There are a few operational issues as well that need to be addressed, they add.
The trade files provided by the exchange are typically delayed and only reach a brokerage by 4:30 PM, while brokers are required to complete their pay-ins by 3:30 PM, said a person from a leading brokerage firm.
The person added that these trade files serve as the definitive source of data for all trades executed by the broker. Under the T+0 settlement model, the settlement itself must be completed by 3:30 PM. However, given the short window between 1:30 PM and 3:30 PM, it is currently not feasible to receive the trade files from the exchange, and complete the pay-in.
A major reason for no volumes in the T+0 settlement is the absence of anything new being offered to the client, say experts. Unless it is an emergency, no investor would choose the T+0 settlement as there is no liquidity and they’re happy with getting settlement the next day.
Experts further say that for foreign portfolio investors (FPIs), T+0 seems like a dream that cannot come true. While FPIs may opt for T+0, the actual settlement often stretches to T+2 or even T+3, said Trivesh D, chief operating officer at Tradejini, speaking to Moneycontrol. This delay arises because Indian banks need to transfer funds to foreign counterparties in other countries — a process that is not feasible within the T+0 timeline, he said.
“Only when T+0 becomes compulsory, will regulators begin addressing related challenges, such as aligning dividend dates, ex-bonus dates, and other operational aspects,” said Trivesh.