At FYERS, settlement refers to the final stage of a trade, where securities are transferred from the seller to the buyer, and funds are credited from the buyer to the seller. This process ensures every trade is completed accurately and within a specified time frame. Settlement can happen through regular delivery of shares under the rolling T+1 cycle or, in exceptional cases, through a cash adjustment known as ‘X’ settlement.

Understanding Settlement Cycles

The settlement cycle determines when the transfer of funds and securities takes place after a trade. In the Indian equity market, we follow a T+1 rolling settlement cycle.

• T = Trade Date (the day your order is executed)
• +1 = Settlement Day (the next trading day when the exchange of funds and shares occurs)

This means if you buy shares on Monday, they are credited to your Demat account on Tuesday. Similarly, funds from a sale are credited to your trading account on Tuesday.

Rolling Settlement

Rolling settlement ensures that trades executed on any given trading day are settled independently of other days. Each day “rolls” into its own T+1 cycle, allowing for efficient and predictable trade completion.

How It Works:

• Each day’s trades are cleared separately by the exchange clearing corporation.
• Buyers receive securities, and sellers receive funds on the next trading day (T+1).
• Weekends and exchange holidays are excluded when calculating settlement days.

Example:

• If you buy shares on Monday (T), they are delivered to your Demat account on Tuesday (T+1).
• If Tuesday is a trading holiday, settlement takes place on Wednesday.

T+1 and T+2 Settlement Explained

Before January 2023, Indian stock markets followed a T+2 settlement cycle. From 27th January 2023 onward, all listed equities in India moved to a T+1 settlement cycle as directed by SEBI. This transition allows investors to receive both securities and funds faster.

• Buyers receive shares in their Demat accounts by the end of the next trading day.
• Sellers receive their sale proceeds the next trading day.
• Weekends and holidays are not included in the settlement period.

Example:

• Buy on Friday → shares delivered on Monday (if no intervening holiday).
• Sell on Wednesday → funds credited on Thursday.

Why T+1 Settlement Matters

• Provides faster liquidity and reduces counterparty risk.
• Improves market efficiency by shortening the cash-to-securities cycle.
• Ensures faster and more reliable investor payouts.

‘X’ Settlement (Cash Settlement)

In rare cases where physical share delivery cannot take place, a cash settlement—commonly called ‘X’ settlement—is carried out. Instead of transferring shares, the exchange settles the transaction by crediting the monetary equivalent of the trade’s value.

How It Works:

• Normally, shares are credited to the buyer’s Demat account on T+1 day.
• If delivery fails (for example, due to a seller’s default or a dematerialization issue), the exchange compensates the buyer through a cash payout.
• This ensures the buyer is not left uncompensated when physical delivery is not possible.

Internal Settlement

• When both the buyer and seller are FYERS clients, settlement may occur internally without exchange-level movement of shares.
• Example:
• Mr. X sells 20 shares of ABC Ltd.
• Mr. Y and Mr. Z, both FYERS clients, buy 10 shares each.
• FYERS internally transfers these shares between client accounts, ensuring smooth settlement.

Cash Settlement Example

• Ms. L buys 10 shares of MRF Ltd.
• If delivery fails on T+1 and no internal match exists, FYERS initiates a cash settlement.
• Ms. L receives the cash equivalent of those shares instead of physical delivery.

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Last updated: 03 Nov 2025