FPIS knock on Sebi door to defer T+1 diktat
Foreign portfolio investors have shot off yet another letter to Sebi Chairman Ajay Tyagi in what appears to be a last-ditch attempt to get the regulator to defer its diktat on the T+1 settlement cycle. Three out of five FPIS investing into the country come from outside Asia and the move to a shorter settlement cycle could hurt them the most.
Foreign portfolio investors (FPIS) have shot off yet another letter to Securities and Exchange Board of India (Sebi) Chairman Ajay Tyagi in what appears to be a lastditch attempt to get the regulator to defer its diktat on the T+1 (trade plus one day) settlement cycle.
FPIS have urged Sebi to put off the move so that all stakeholders get sufficient time to identify and test the operational processes required to safely implement the T+1 model, which comes into force from January 1.
Three out of five FPIS investing into the country come from outside Asia and the move to a shorter settlement cycle could hurt them the most.
The US, which expressed its intent to move to a T+1 settlement cycle earlier this year, has set a 2023 deadline for the migration, effectively allowing about two years for market players to prepare.
“FPIS are ready to work with Sebi, other regulatory authorities, and market participants to identify and find solutions to the numerous operational and business challenges that come with a shorter settlement cycle to ensure that India’s migration to T+1 settlement can be achieved with little disruption or risk to the market,” said a note written jointly by the Asia Securities Industry & Financial Markets Association (Asifma), Asia Traderforum (ATF), and The Investment Association (IA).
Citing research conducted by the Boston Consulting Group in 2012 and by the World Bank on India in 2013, the industry bodies have stated that migration to the new cycle would require end-to-end process redesign, substantial technology investments and enhancements to support near real-time processing capabilities.
This would necessitate an extended migration timeline, especially for investors based in the US and Europe, which operate in markedly different time zones and have to work with multiple parties such as global and local custodians, foreign exchange banks and brokers in different jurisdictions to execute trades.