T+1 settlement system

T+1 settlement system

Part of: Prelims and GS III – Economy

Context Securities and Exchange Board of India (SEBI) has offered T+1 settlement system for stock Market exchanges. 

• If the stock exchange agrees to the proposal, investors will get money for shares they sold or bought in their accounts faster, and in a safer and risk-free environment.

What Is T+1 (T+2, T+3) cycles?

• T+1 (T+2, T+3) are abbreviations that refer to the settlement date of security transactions.
• The “T” stands for transaction date, which is the day the transaction takes place.
• The numbers 1, 2, or 3 denote how many days after the transaction date the settlement—or the transfer of money and security ownership—takes place.
• Stocks and mutual funds are usually T+1 and bonds and money market funds vary among T+1, T+2, and T+3.