Faster funds, more flexibility: How T+0 settlement cycle benefits investors

India's stock exchanges on Thursday launched the same-day transaction settlement (or "T+0") beta version for a select few cash segment stocks.

Market regulator Sebi recently introduced a new settlement cycle for stock trades, called T+0. This means that instead of waiting a day (T+1) for the trade to settle and funds/stocks to be delivered, everything gets settled on the same day (T+0) of the trade. 

 T+0 is currently in a beta phase. This means it's only being implemented for a limited number of stocks (around 25) and with a select group of brokers. The pilot programme is designed to assess the effectiveness and iron out any potential issues before a wider rollout.After evaluating the results at the three- and six-month marks, capital market regulator SEBI will determine the next step.

Currently, when you buy a stock (T+1):

You pay for it, but the stock doesn't actually show up in your account for a day. Sellers under the present T+1 system may only get 80% of their cash on the day of sale; the remaining 20% must be waited for the following day. 

With T+0:

You pay for the stock, and it gets added to your account immediately. This means:

You can sell the stock and get the money right away to buy something else.

It might be especially helpful for short-term traders who want to react quickly to market changes.

There will be two stages to the T+0 settlement cycle. Phase 1 deals made up to 1:30 pm will be taken into account for the settlement, which must be finished by 4:30 pm. Trading will begin at 1:30 pm and last until 3:30 pm in the second phase and the first phase will be discontinued.

Subject to recalibration after every 50 basis point change, a price band of -100 basis points from the standard T 1 market price will be in place. Index computation and settlement price computation are unaffected by T 0 pricing.

How does this help investors?

Increased Liquidity: This quicker access to funds allows you to re-invest your money faster, potentially taking advantage of new investment opportunities.