‘Sebi is ready with tech to power 1-hour settlement cycles’

MUMBAI: Settlement of stock trades is set to change dramatically by 2024. “From January 2024, the Indian market would move to an ASBA-like trading cycle, and in about 2-3 months after that, we would move to a one-hour settlement cycle,” a Sebi source said.
“We are ready with the technology that would power the one-hour settlement cycle. An instantaneous settlement cycle could take some more time,” since the regulator is currently working on the trading system that would power instantaneous settlements.
ASBA, or Application Supported by Blocked Amount, is a process used for applying in IPOs, where the fund required for the application in the offer is not moved out of the investor’s bank account, but the amount is blocked for debit. Once shares are allotted to the IPO applicant, the money is debited. If no shares are allotted, the block is lifted.
A similar system will be used in the secondary market: funds in the bank account of a buyer of stocks and shares in the demat account of a seller will be blocked till the trade is executed or cancelled. Once this system is introduced and then stabilised over the next couple of months, the Indian market will move to a one-hour settlement cycle. Under this system, stock buyers will get the shares they bought in their demat accounts within an hour. It will take the same time for sellers to get the money in their bank accounts when they sell stocks.

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