Definition
Rolling Settlement
Rolling settlement is a system in which trades settle a fixed number of days after the trade date on a continuous daily basis, replacing the older fixed account-period settlement.
India adopted rolling settlement to replace the legacy weekly account-period (badla-era) system, where trades were netted over a fixed period and settled on one day, encouraging speculation. Under rolling settlement, every trading day's transactions settle on their own T+1 (or T+0) date.
This daily, position-by-day approach reduces the build-up of large unsettled exposures and curbs the carry-forward speculation that the old system enabled. It is the foundation on which the move to T+1 and T+0 rests, requiring robust netting, clearing corporation guarantees and depository coordination.
Related terms
- Clearing CorporationA clearing corporation is the entity that clears and settles trades on an exchange, becoming the buyer to every seller and the seller to every buyer through novation, and guaranteeing settlement.
- Settlement Cycle (T+1/T+0)The settlement cycle is the time between trade execution and final settlement of money and securities, expressed as T plus the number of business days, such as T+1 for next-day settlement.
- NettingNetting is the offsetting of a member's buy and sell obligations in the same security and settlement so that only the net quantity of shares and net amount of money change hands.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.