Hi all,
Effective today, all the securities traded in India will follow a T+1 Settlement cycle. India will be the first country to implement T+1 across all the securities. In China only a few segments follow the T+1 settlement cycle. Countries such as the US, Europe, and Japan are still following the T+2 settlement cycle. The new T+1 settlement will shorten the settlement period by a day. This will give investors more liquidity with the faster availability of funds and securities. Let us understand the impact of this migration.
1. I purchased securities on Monday, when will I receive them in my demat?
The securities purchased on Monday, will come in the demat on Tuesday at around 3 PM.
2. How will it impact the BTST trade?
BTST will still exist and you would be able to sell without upfront margin. Let us consider an example to compare the before and after scenario. Say you bought a security on Monday and sold it on Tuesday.
Before (T+2): The PAYOUT of the security you bought on Monday came on Wednesday (by 3 PM) whereas PAYIN of the security you sold on Tuesday had to be done on Thursday (by 10 AM). Here while selling you had to have an upfront margin.
After (T+1): The PAYOUT of the security you bought on Monday came on Tuesday (by 3 PM) whereas PAYIN of the security you sold on Tuesday had to be done on Wednesday (by 10 AM). Here while selling you do not need to have an upfront margin.
Hence, BTST trades can be placed without any additional margin as in the case earlier. However, the risk of short delivery due to securities not received from sellers still exists as before.
3. How will it impact MTF interest?
Let us consider an example to compare the before and after scenario. Say you bought a security on Monday.
Before (T+2): The interest was charged from the settlement day i.e. T+2 (From Wednesday). Hence, you get 2 days of interest free period.
After (T+1): The interest will be charged from the settlement day i.e. T+1 (From Tuesday). Hence, you get 1 day of interest free period.
4. How this migration will impact the corporate actions?
On the corporate action front, earlier there were two dates.
Before (T+2): Ex-date was one day prior to the Record date.
After (T+1): Ex-date and Record date will be the same.
Thank you,
Shrimohan Jhawar
Product Operations @ Dhan