What does T+2 settlement mean?
The 'T+2' settlement represents the timeline for completing a security transaction.
Here’s a breakdown:
T (Transaction Day): The day the trade takes place.
T+2: Refers to the fact that the finalisation of the transaction – both payment and receipt of the securities – must be completed within two trading days after the trade.
In simpler terms, after executing a trade on the 'T' day:
The buyer is required to pay the entire amount to the seller by the end of the second trading day.
Conversely, the seller must ensure that the buyer receives the shares by the end of the second trading day.
However, as of 27th January 2023, there's been a shift. The equity segment now follows a T+1 settlement cycle. This means trades are settled a day after they are executed. For more details, refer to this notice.
It's essential to keep in mind that while calculating the settlement day, intervening holidays, including bank and NSE holidays, as well as weekends, are excluded.
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