SEBI is doing an incredible job. @nithin your thoughts on this ? Impact on our markets overall
5 Likes
@nithin, what would be the benefits of 1-hour settlement over same-day settlement? I can imagine if there was a BTST opportunity then the trader wouldn’t lose it all if he could verify receipt of shares using 1-hour settlement, he could buy again and still get some profits. Is there any other benefits of 1-hour settlement over EOD settlement? How often does short-deliveries happen such that 1-hour settlement is affordable over same-day settlement? I believe people with big capital would trade derivatives, so is there really a real need of 1-hour settlement or same-day settlement would also just work fine?
2 Likes
Whether they introduce 1-hr settlement or same-day settlement, they should allow using 100% of sale proceeds for taking positions, I’d love that even better. Well, but let’s see how it goes.
4 Likes
I hope they don’t equalize the Cash and Intraday charges,with the rumoured instant settlement by 2024 October.
What the heck? Does instantaneous settlement mean shorters would have to compulsorily use derivatives and for a person to short the spot in respect with there derivatives trades they would have to already be holding the shares? Man… this is gonna be expensive on big players. Plus the index companies are gonna be more expensive (by way of new big investors) than they already are.
@nithin, this is bad for intraday traders, anything you can tell?
I have no idea about this. But if they have to really pull this off, they will have to separate out intraday and delivery-based trades. If the buyer and seller have to be settled in 3 hours, the person selling the stock to the buyer will need to give stock in 3 hours, and the person buying has to give full money in 3 hours. This wouldn’t be possible for intraday traders. But if you separate out intraday and delivery trades, the depth and liquidity will significantly drop. There is no material upside to the customer from a 3-hour settlement, not enough to make up for the risk of impact cost going up higher for sure.
We will give this feedback whenever we are asked for it.
12 Likes
How can impact cost increase because of this?
Currently, all equity trades happen in one segment of the exchange. It is impossible to introduce a 3-hour settlement along with a T+1 settlement on the same segment. So a new segment will have to be introduced where trades happen between folks who have full stock and full cash. A new segment would mean volume for a stock getting split and hence liquidity reducing and impact cost increasing.
Unless of course, there is some other way to make all of this happen that I am not able to think of.
1 Like
Hm… that’s totally true, how I missed that?
For me I don’t really understand why do they want instant settlement. I mean. the need is of same-day, all else is simply just very rare cases of losing trade opportunities. I think same segment with same-day settlements would be the way. I mean, is there really a need of any faster settlements? Doesn’t intraday already cover all else? Of course, except for that little BTST thing I mentioned.
so then we will have hourly/3H auctions 
The focus should be to eradicate short delivery that will then relieve the auction system.
At Z, there is a check to before CNC Equity sell but its not market wide.
You misunderstood my point with short-deliveries. what I meant was, that if there was a BTST trade opportunity and a trader didn’t receive shares in his demat in an hour, he could buy 'em again before the auction happens. He’ll end up with some useless quantity, but he’ll still not totally lose the opportunity. Any faster deliveries than same-day would hurt many traders, suppose if I wanted to arbitrage and therefore sell shares, but if I didn’t own the company then I’d lose it, not a good thing for intraday traders. Auctions are supposed to be happening much lesser than spot-selling opportunities, and I didn’t count the regular intraday traders besides the arbitrage ones, even they would be forced to hold quantity of every stock shares and be able to trade only those whose shares they have, this is all really bad for intraday traders. Wish only same-day settlements come, 3-hour, 1-hour or instantaneous will only hurt people.
please guide ? will there be 3 types of settlement (1) 1 hour or 3 hour what ever it may be (2) t plus 1 (3) intraday ?
What about SLB market? Will 3 hour make SLB more popular in India?
There are no answers to these questions, as there is no clarity on how exactly this will work. I am sure SEBI will put up a consultation paper first. I guess we have to wait until then to get some idea.
We have no confirmation yet. But I will recommend against anything faster than same-day settlement.
@BornArcher8 SLB is really not my thing, but I can tell that it will depend upon whether they can charge interest for a single-day, but I’m sure same-day settlement would be the final choice of the regulators. I mean, as majority volumes come in Nifty and they have a impact cost requirement, if the volume are heavily reduced the whole indexing thing would lose it’s meaning. So they will have to in order to maintain the validity of the index keep only one segment for the intraday and delivery trades. Same-day settlement is the only sanest and completely fulfilling choice for the regulators. I mean, think practically, Is the increased impact costs really worth anything that a faster settlement can provide? Same-day settlement is the best choice.
hope it doesnt affect intraday trading and MIS…nithin plz dont let them curb intraday volumes and same day squareoff
What is the settlement time in US ?
T+2 days
It changed from T+3 to T+2 in 2017.
But i think SEC has implemented the 24 month process to settle in T+1 day from Feb 2023.
Oh is it, they are still not in T+1 - then the step SEBI is taking to settle in T + 3hrs is pretty steep I guess.
we have a saying “Too much bath kills the baby…”
SEBI’s nudge to shift speculators from EQ to FNO may not be good for the industry.
It’s even hypocritical as they recently mandated that brokers display warnings about risks associated with derivatives trading.