The T+1 Settlement Cycle

Context: After China, India will become the second country in the world to start the ‘trade-plus-one’ (T+1) settlement cycle in top listed securities today (January 27), bringing operational efficiency, faster fund remittances, share delivery, and ease for stock market participants.

About the T+1 Settlement Cycle:

• The T+1 settlement cycle means that trade-related settlements must be done within a day, or 24 hours, of the completion of a transaction.
• Until 2001, stock markets had a weekly settlement system.
• The markets then moved to a rolling settlement system of T+3, and then to T+2 in 2003.
• The United States, United Kingdom and Eurozone markets are yet to move to the T+1 system.

Significance of T+1 plan:

• In the T+1 format, if an investor sells a share, he/she will get the money within a day, and the buyer will get the shares in his/her Demat account also within a day.
• This will also help investors in reducing the overall capital requirements with the margins getting released on T+1 day, and in getting the funds in the bank account within 24 hours of the sale of shares.
• The shift will boost operational efficiency as the rolling of funds and stocks will be faster.

Source: Indian Express

Previous Year Questions

Q.1) With reference to Non-Fungible Tokens (NFTs), consider the following statements:

1. They enable the digital representation of physical assets.
2. They are unique cryptographic tokens that exist on a blockchain.
3. They can be traded or exchanged at equivalency and therefore can be used as a medium of commercial transactions.

Which of the statements given above are correct? (2022)

1. 1 and 2 only
2. 2 and 3 only
3. 1 and 3 only
4. 1, 2 and 3

Q.2) With reference to India, consider the following statements:

1. Retail investors through Demat account can invest in Treasury Bills and Government of India Debt Bonds in the primary market
2. The “Negotiated Dealing System-Ordering Matching” is a government securities trading platform of the Reserve Bank of India.
3. The “Central Depository Services Ltd” is jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange.

Which of the statements given above is/are correct? (2021)

1. 1 only
2. 1 and 2
3. 3 only
4. 2 and 3