After T+1, working on ‘instantaneous’ settlements, says Sebi chief

The Securities and Exchange Board of India (Sebi) says it is currently working on an ambitious plan of "instantaneous settlements" on the stock exchange, and that the regulator is engaged with the ecosystem to settle payments in real-time.

"We believe that in the not very far future, we will have a mechanism which will facilitate instantaneous settlements on the stock exchange," says Madhabi Puri Buch, chairperson, Sebi, in a press conference.

The SEBI chief adds that India is the first major economy that has moved into T+1 settlement for all its scrips and this is something that is considered “pathbreaking”.

“Many of the jurisdictions conveyed to us that they were facing significant challenges to move into T+1 settlement. But the immediate impact on a conservative basis is that almost ₹10,000 crore of margin has been released back into the system,” she adds.

The SEBI chief says earlier if one traded on Day T, the margin was kept for two days, and if trade happened on T+1, the margin was again kept for two days. “Now you are keeping only one day margin, so almost ₹10,000 crore average reduction of market level margin, and again this is only for equity cash."

The current Sebi announcement comes after its decision last year, which shortened the settlement cycle (time taken between selling shares and receiving cash or buying shares and receiving Demat shares) T+1 (trading day plus one day) instead of the traditional T+2 settlement cycle, making it the world’s first watchdog to implement such a rule.

The Sebi chief also talked about other initiatives taken by the capital markets regulator during the past year, including flexibility for the confidentiality of filing draft offers. "Many new-tech companies had expressed this requirement, which we facilitated. So they can do confidential filing and start testing the market and only when they are confident that they want to actually go with the IPO, the prospectus is made public."

The Sebi chief says the second reform was 'permission to pension funds’ as anchor investors. The set of pension funds that are not permitted was relaxed to facilitate a greater number of participants, she adds.

On procedures for buyback, the Sebi chief says the regulator simplified the process. "Sebi's comments on the draft letter of the offer were just dispensed with. We did an analysis and found that there was really very little add that we were doing in terms of buyback proposal...we felt there was no requirement for us to intervene, the data supported this view and we dispensed with it."

Along with it, the Sebi also dispensed with the physical documents to go to shareholders and the buyback timeline was cut to optimise to conclude the entire process speedily, she says.

In respect of open offers, the market regulator made a relaxation, one was specifically for the PSUs, she says. "We changed the determination of the open offer price to make it much more realistic for the divestment of PSU companies, and some small matters."