Sebi plans instant trade settlement in Oct 2024

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In a bid to increase efficiency in the capital markets, markets regulator Securities and Exchange Board of India (Sebi) has taken one more step. Now trade settlement will happen more quickly, this will increase efficiency in the price as well as more liquidity.

India’s markets regulator said on Monday it will go ahead with a plan to allow the settlement of equity market trades within the same day as it looks for ways to help Indian retail investors, provided there are no “serious objections” from market participants.

India in January moved to a system where trades are settled in one business day. The regulator now plans to add an to optionally allow settlements instantly, beginning October 2024.

Foreign investors have been pushing back on the regulator for instant settlement on fears that two cycles would lead to a fragmented system and add to the cost of trading.

Securities and Exchange Board of India (SEBI) whole-time member Ananth Narayan said on Monday that the regulator is “conscious” that the introduction of the new settlement plan should not lead to any fragmentation of market liquidity.

“Any framework for optional same day settlement – which will be with adequate consultation – will have elements to ensure that any such concerns are adequately addressed,” Narayan said at Mumbai’s The Network Forum Asia, a forum of offshore investors and custodian banks.

“If there are serious objections, we will not do it, but we are presently exploring instant settlement in a non-disruptive manner,” he added.

Narayan added that SEBI had formed a working group to ease regulations and the registration process for offshore funds under the chairmanship of a former SEBI whole-time member.

Separately, he said SEBI is “cognizant” of the growing breed of retail investors trading in the derivatives market and will keep issuing warnings on the risks involved.

(With inputs from Reuters)