What Is T+2 Settlement Cycle?
This is a series of explainers to educate and inform new investors. In association with Dun & Bradstreet India as knowledge partner.
T+2 Settlement Cycle: Definition, Meaning & Basics
In the capital market, every trade undergoes a life cycle. This starts with the placing of an order for execution and ends when the trade is settled. This process is called trade life cycle.
T+2 settlement cycle is followed in stock markets in India. This means that it takes two days for a trade life cycle to be completed—from initiation to settlement.
The first step in a trade life cycle is placing of an order, which is followed by matching and execution of the order. The trade is then cleared by a clearing house of the stock exchange. The last stage is settlement, which involves pay in and pay out of securities and funds, on the second or last day of the trade life cycle. Trades which do not successfully settle undergo a process of auction of shares.
For institutional trades, the process of confirmation is done on T+1 basis.