Benefits and concerns of faster trade settlements

Faster trade settlements can benefit individual investors by providing immediate access to their money after selling shares. This eliminates the need for leveraging or margin trading, reducing financial risks. It is estimated that faster settlements already benefit the investor community by approximately ₹3,500 crore annually. However, foreign investors, operating in different time zones and dealing with multiple countries, may encounter challenges with immediate settlement. They typically have to pre-fund their accounts and may face idle funds without earning interest. Additionally, in the case of intra-day trading, where shares are bought and sold within the same day, instant settlement might be challenging due to the time required for obligations to be crystallized and transactions to be settled by clearing corporations. Despite these concerns, SEBI's move towards faster settlements, even potentially instant settlement, could have significant implications for the market.