Definition
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.
India has progressively shortened its equity settlement cycle, moving from T+2 to T+1 (fully implemented in early 2023) and then piloting T+0 same-day settlement for a set of stocks. A shorter cycle reduces counterparty and market risk and frees up capital faster, putting India among the fastest-settling markets globally.
Under rolling settlement, each day's trades settle on their own schedule rather than being batched to a fixed account day. The compression to T+1 and the optional T+0 require tighter coordination between the clearing corporation, depositories and banks to move securities and funds within a single day.
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.
- Rolling SettlementRolling 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.
- 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.