Stock exchanges will have flexibility to either offer T +1 or T +2 settlement cycle for share transactionsCapital markets regulator Sebi has introduced an optional T +1 (Trade day plus 1 day) settlement cycle for conclusion of share transactions to enhance market liquidity.

Under the T +1 guideline, stock transactions will be settled on the extremely next day and not after 2 days as is the current norm.

Stock exchanges will, nevertheless, have the flexibility to either offer T +1 or T +2 settlement cycle for conclusion of share transactions.

The brand-new rule will enter into force on January 1, 2022.

The market regulator chose to shorten the settlement cycle on the basis of requests from numerous stakeholders.

Based upon discussions with market infrastructure institutions (stock exchanges, clearing corporations and depositories), it has been decided to supply versatility to stock market to offer either T +1 or T +2 settlement cycle, Sebi stated in a press release.A T +1 settlement cycle will indicate that, in case of share purchases, the shares will be credited into the demat account a day after the trade day.

In case of sale deals, the money will be credited into the account on the really next day.

Under the aegis of the T +2 settlement cycle, which is presently in style, the shares or the cash are credited after 2 days.Stock exchanges can switch to the T +1 settlement cycle on any shares after offering an advance notification of at least a month to all stakeholders, including the investing neighborhood, Sebi stated in the circular.

SEBI even more mandated that after the switchover, the stock market will have to continue with the T +1 settlement cycle for a minimum duration of six months.If the stock exchanges want to revert to the T +2 settlement cycle, they will once again need to provide a one-month notice to all stakeholders.Sebi likewise asked the stock market, clearing corporations and depository individuals to put systems and treatments in location for smooth roll-out of the T +1 settlement cycle and make needed changes to relevant bye-laws, rules and guidelines.