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:
- They enable the digital representation of physical assets.
- They are unique cryptographic tokens that exist on a blockchain.
- 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 and 2 only
- 2 and 3 only
- 1 and 3 only
- 1, 2 and 3
Q.2) With reference to India, consider the following statements:
- Retail investors through Demat account can invest in Treasury Bills and Government of India Debt Bonds in the primary market
- The “Negotiated Dealing System-Ordering Matching” is a government securities trading platform of the Reserve Bank of India.
- 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 only
- 1 and 2
- 3 only
- 2 and 3
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