new Delhi. The new rule of T + 1 settlement will be applicable from Friday amidst the huge fluctuations in the stock market. On both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), now the transfer of shares and money to investors will be done in a day.
The government and SEBI had been planning to implement the T+1 settlement rule for a long time, but foreign investors objected to it. At present, T+2 settlement system is applicable on both the exchanges, which was introduced in the year 2003. Under this rule, it takes two days for the transfer of shares and money. Earlier there was T+3 system, which used to take three days.
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Understand how this formula works
Settlement system means transfer of stock or money to your account on the purchase and sale of shares. Currently, the exchanges follow the T+2 system, which means it will take two days for the money or shares to arrive in your order placement account. For example, if you sell a share on Monday, then after two days the money will come in your demat account. Similarly, if you have bought shares, then after two days you will get the stocks.
what will change now
With the implementation of T+1 settlement system in the market from Friday, money or stocks will be transferred to your account on the second business day of the day you buy or sell shares. Initially, 100 shares placed at the bottom according to market valuation will be included in T+1. Thereafter 500 new stocks will be added on the last Friday of every month until all are included.
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Hence the need for a new system
SEBI, while proposing this system in September last year, had said that by reducing the time of settlement, investors will be able to pay shares and money sooner. This will block the margin of investors’ trading account for only one day and will also help in increasing the number of retail investors in the equity market. SEBI said that this system will be done in all types of security transactions.
Tags: BSE Sensex, NSE, SEBI, Share market
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