India regulator exploring non-disruptive approach to instant equity trade settlement

By Jayshree P Upadhyay

MUMBAI (Reuters) -India’s markets regulator said on Monday it will go ahead with a plan to allow the settlement of equity market trades within the same day as it looks for ways to help Indian retail investors, provided there were no “serious objections” from market participants.

India in January transitioned to a plan where trades are settled in one business day. The SEBI now plans to add an option – by October 2024 – to allow settlements instantly, Reuters had reported in September.

Offshore investors have been pushing back on the Securities and Exchange Board of India’s (SEBI) instant settlement move on fears that two cycles would lead to a fragmented system and add to the cost of trading, Reuters reported last month.

Securities and Exchange Board of India (SEBI) whole-time member Ananth Narayan said on Monday that the regulator is “conscious” that the introduction of the new settlement plan should not lead to any fragmentation of market liquidity.

“Any framework for optional same day settlement – which will be with adequate consultation – will have elements to ensure that any such concerns are adequately addressed,” Narayan said at Mumbai’s The Network Forum Asia, a forum of offshore investors and custodian banks.

“If there are serious objections, we will not do it, but we are presently exploring instant settlement in a non-disruptive¬†manner,” he added.

Narayan added that SEBI had formed a working group to ease regulations and the registration process for offshore funds under the chairmanship of a former SEBI whole-time member.

Separately, he said SEBI is “cognizant” of the growing breed of retail investors trading in the derivatives market and will keep issuing warnings on the risks involved.

(Reporting by Jayshree P Upadhyay; Writing by Chris Thomas; Editing by Janane Venkatraman and Nivedita Bhattacharjee)