To usher in T+1 cycle, SEBI board meet may give early pay-in option for traders

Our Bureau Mumbai | Updated on December 14, 2020

SEBI board meet on Wednesday will consider improvement in the settlement cycle for stock markets among other issues. It is likely that the regulator may seek implementation of T+1 (trading day+1) settlement cycle in a phased manner, according to sources close to the development.

‘Practical difficulties’

Currently, the settlement of trade, that is, final payout of funds happens on a T+2 basis. But to improve the efficiency and hasten pay-out of funds, SEBI has been discussing ways to bring in T+1 settlement. However, both domestic brokers and foreign portfolio investors (FPIs) have opposed the move citing practical difficulties.

It is likely that SEBI may implement T+1 as an optional rule to begin with, the sources said. This will also not put additional load on the current infrastructure and clearing corporations, and allow trial and error, the sources said.

FPIs have told SEBI that they face practical issues with T+1 settlement in India as they operate via multiple time zones.

In November, SEBI had discussed the issue of faster trade settlement with its Secondary Markets Advisory Committee (SMAC), which comprises members from stock exchanges, brokers and even FPIs. The SMAC was divided in its opinion on the issue, the sources said.

Listing of bankrupt Co stocks

A body representing FPIs had also written to SEBI saying it would find it difficult to trade in India if the T+1 settlement rule was forced upon them, the sources said.

This apart, SEBI also plans to tweak rules regarding minimum public shareholding (MPS) requirement for companies getting relisted on the stock exchange after the IBC process. This is to prevent a Ruchi Soya-like share price rally where the price was locked in the upper circuit for months, post listing, as promoters held 99 per cent stake in the company.

One of the options suggested by SEBI is to make it mandatory for such entities to meet a minimum public shareholding requirement of 10 per cent within six months of completion of debt resolution.

Now, such entities have 18 months to achieve at least 10 per cent public shareholding and 25 per cent within three years.

Published on December 14, 2020

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