Rolling Settlement

Trading

Quick Definition

Rolling Settlement is a system where trades in the stock market are settled within a fixed number of days (T+n) after the transaction date.

Detailed Explanation

In a Rolling Settlement system, each trade is settled individually based on its trade date, rather than being grouped together.

For example, if you buy shares today (T day), they will be delivered and payment settled after a fixed period such as T+1 (next working day).

In India, stock market settlements are handled through exchanges like the National Stock Exchange and Bombay Stock Exchange under regulation of the Securities and Exchange Board of India.

How Rolling Settlement Works

  • T (Trade Day): Buy/sell order executed
  • T+1: Settlement completed (shares delivered & payment made)

Key Features

  • Faster settlement cycle
  • Reduced risk of default
  • Improved market efficiency

Rolling Settlement vs Account Settlement

  • Rolling Settlement: Trade-wise settlement
  • Account Settlement: Periodic settlement (older system)

Why It Matters

  • Enhances transparency
  • Reduces counterparty risk
  • Improves liquidity

Example

"If you buy shares on Monday (T), they are credited to your Demat account by Tuesday (T+1)."

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