The Securities and Exchange Board of India (SEBI) is continuously working on a new initiative that will implement instant transaction settlement in the Indian stock market at T+0. This will be done through Unified Payments Interface (UPI), online repository and technology stack.
It means that the transaction will be settled immediately, instead of the current T+1 billing cycle, which means the transaction is settled one day after the transaction date or within 24 hours of the actual transaction. economic.
SEBI President Madhabi Puri Buch aims to settle transactions in real time in the stock market. She speaks: “Certainly, one of the things we think isn’t that far away is instant settlement on a stock exchange. We’re working on that right now. We think the next natural step is payments. immediately. Will it be completed this financial year? Not sure, maybe. But it could also spread to next year.”
The T+1 payment cycle was announced recently in January 2023, marking a step up from the previous T+2 payment cycle. It will come into effect from October 1, 2023. This trading cycle improves efficiency and simplifies transactions for the stock market.
What are the benefits of the New Instant Transaction Payment Method?
Instant transaction settlement offers several benefits to investors and market participants:
Reduced risk for investors: Currently, if an investor sells shares on a certain date, they will not receive the proceeds from the sale until the next day. This means that if the market plummets overnight, the investor could lose money on selling. With instant transaction settlement, investors will receive the proceeds of their sale immediately, which will reduce their risk.
Nirav Karkera, Head of Research at Fisdom told Business Standard: “The adoption of such an instant payment method will have a positive, direct impact on the cash segment, where volume is expected to increase as investments move through stocks without delay. .”
“Right now, investors need to wait to buy one more stock in the cash segment or based on the limit set by the stockbroker. While the first case shows that the whole investment experience is inefficient, the second case involves a lot of subjectivity on the part of stockbrokers.” Such developments can also be expected to help stockbrokers, as the level of default risk to the rates of return offered to clients will be significantly reduced,” he added. .
Increased market liquidity: This is because investors will be more likely to trade if they know they will receive the proceeds from the sale immediately. Increased liquidity will make the market more efficient and benefit all investors.
Avinash Gorakshkar, Head of Research at Profitmart Securities told Mint: “SEBI’s move towards immediate settlement is expected to accelerate the pace of new stock issuance, debt issuance, approval of mutual fund programs. The move is expected to increase block volume in the cash segment because one can switch from one stock to another on the same day rather than waiting for one’s transaction to be settled in a day or two (if applicable on scripts).”
Reducing the risk of payment failure: Currently, if a payment fails, it can have a spillover effect throughout the market, resulting in losses for investors and market participants. With instant transaction settlement, the risk of payment failure is greatly reduced.
Reduced costs for market participants: Currently, there are a number of fees associated with trading settlements, such as clearing and settlement fees. With instant transaction settlement, these fees will be reduced, which will benefit both investors and market participants.
In conclusion, instant commercial settlement could be a promising development that could bring some benefits to the Indian stock market. However, there are several challenges that need to be addressed before it can be implemented. If these challenges can be overcome, instant trade settlement could make the Indian stock market more efficient, more accessible and more secure.
Categories: Optical Illusion
Source: pagasa.edu.vn