NSE introduces ‘T+0’ same-day settlement scheme

Clearing members who opt for pay-in on T+0 basis would not be levied scaled-up margins

The National Stock Exchange (NSE) has introduced a same-day settlement scheme ‘T+0’, under which members can save on additional margins if the payments for trades are made before the opening of the next trading session.

NSE—in a circular to come into effect from 15th March—said members opting for this ‘T+0’ facility (which refers to settlement on same day of the trading) would need to make the payments by 8.30am on the next settlement day. The day’s trading begins at about 9.00am on the bourses.

Usually, the members are allowed to make the payments after the opening of trading hours in the next trading session under the T+1 settlement. NSE said that the members can opt for ‘T+0’ facility at any time, but they need to intimate the Clearing Corporation in advance about the same in a specified format, while they also need to give a prior intimation for revoking this facility.

“The pay-in of T+0 settlement obligation for such clearing members shall be done at 8:30am on the next settlement day,” NSE said in the circular.

“Clearing members who opt for pay-in on T+0 basis would not be levied scaled-up margins,” it added.

Non-payment or partial payment of settlement obligation by the scheduled time would be construed as non-compliance and penalties applicable for fund shortages from time to time would be levied, the NSE further said.

Some technical terms related to trading

Settlement: A securities trade is not complete—technically called settled—till the stocks are delivered to the buyer and the cash has been delivered to the seller. After you have bought or sold shares through your broker, the trade has to be settled. Meaning, the buyer has to receive his shares and the seller has to receive his money.

Settlement is basically the process whereby payment is made by all those who have made purchases and shares are delivered by all those who have made sales.

Settlement cycle is the period in which the settlement is made. It is the period within which buyers receive their shares, and sellers get their money.

Settlement date refers to the date by which an executed security trade must be completed or settled. That is, the date by which a buyer must pay for the shares delivered by the seller. 

Role of exchanges: The stock exchange makes sure that buyers—who have paid for the shares purchased—receive the shares. At the same time, sellers who have delivered the shares receive payment for the same. The entire process of settlement of shares and money is managed by stock exchanges through the clearing house. The clearing house has been formed specifically to facilitate the transfer and ownership of shares and ensure the process of settlement takes place smoothly.

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