The extension of the T+0 settlement cycle to the top 500 stocks will impact the broker’s profit margin even as they try to charge a higher broking fee for the same-day settlement.

Moreover, the low liquidity will remain a concern in the T+0 cycle as investors may not prefer to pay extra brokerage for getting their own money on the same day.

Capital market regulator SEBI on Tuesday expanded the optional T+0 (same-day) settlement cycle in the equity cash market. Starting January, the same-day settlement will include the top 500 scrips in terms of market capitalisation.

Incidentally, earlier rollout of the T+0 settlement cycle for 25 scrips rolled out in March attracted very little participation from investors.

Brings challenges

Narinder Wadhwa, Managing Director & CEO, SKI Capital said the same-day settlement cycle brings challenges for market infrastructure institutions and intermediaries, including the need for scalable infrastructure, real-time processing capabilities and seamless coordination for foreign institutional investors operating across time zones.

Moreover, he added that two order books for T+0 and T+1 may impact liquidity while brokers may also face revenue impacts due to the loss of float income, necessitating them to develop a new business strategy.

Minimal disruption

However, the optional nature ensures minimal disruption while allowing time for adaptation, said Wadhwa.

The rollout will commence in January with the bottom 100 companies from the list, followed by the next 100 companies each month, until all 500 scrips are covered. This expansion is in addition to the existing 25 scrips under the T+0 cycle.

CA Jashan Arora, Director, Master Trust Group said SEBI is consulting stakeholders to ensure a smooth transition while minimising systemic risks.

While the move could improve liquidity in the long run and reduce settlement risk, he said it poses challenges, including the need for robust infrastructure and coordination among brokers, clearing corporations and custodians.

SEBI has allowed all stock brokers to participate in the optional T+0 settlement cycle and charge differential brokerage fees for T+0 and T+1 settlement cycles, provided these fees remain within the regulatory limits.