Clearing and settlement

India has been on T+1 settlement for equity since January 2023. Trades on T are settled on T+1 — buyers receive shares, sellers receive funds. Clearing corps handle netting (multilateral). If a counterparty fails to deliver shares (short-delivery), an auction is conducted on T+2 to procure them, and the defaulting seller pays a penalty.

Settlement steps: Step 1 (T+1 morning): clearing corp issues the obligation file to broker. Step 2: broker collects funds from buying clients into its settlement account, and securities from selling clients via depository delivery instructions. Step 3 (T+1 12:30pm): broker pays in funds and securities to the clearing corp. Step 4 (T+1 1:30pm): clearing corp pays out to the broker, who passes through to clients. If a seller did not deliver (auction situation), the clearing corp procures shares in the market on T+2 at higher prices, plus a penalty (typically 1% or higher), and recovers from the defaulter.

A nuance: T+0 settlement (same-day, optional) creates a parallel cycle. Selected stocks have a T+0 segment running alongside the T+1. This adds operational complexity — operations teams must reconcile across both cycles, and clients can choose which cycle to trade on. Mismatches in client-instruction (e.g., client expecting T+1 but inadvertently traded on T+0) create reconciliation challenges. Operations roles in 2024-25 increasingly require automation of these reconciliations to handle volume.