It is mandatory to settle all stock market trades as per settlement cycle on _____________ on a rolling settlement basis.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → T+2 days
Option (1) T+1 day — Incorrect as per the book. The book gives T+2. However, T+1 is the cycle actually followed in India today (Note 2).
Option (2) T+2 days — Correct as per the book. Under rolling settlement, each day’s trades are settled a fixed number of days after the trade date (T), not on one common date for the whole week or fortnight. The book says it has been compulsory to settle all trades within 2 days of the trade date since 2003. On that day the exchange delivers the shares to the buyer’s broker and the payment to the seller’s broker.
Option (3) T+3 days — Incorrect. Neither the book nor the present rule uses a three-day cycle.
Option (4) T+7 days — Incorrect. A week is far too long. Weekly and fortnightly settlement was the old system that rolling settlement replaced.
Note 1: Although the chapter ‘Financial Markets’ was dropped from the NCERT textbooks during rationalisation, it has stayed in the NTA syllabus every year since 2022, except for 2025, and it is part of the syllabus again from 2026. This question is therefore based on the pre-rationalised NCERT, an extract from which is given below. Note 2: SEBI has since shortened the settlement cycle. It moved stocks to T+1 in phases from February 2022, and all stocks have been settled on T+1 since 27 January 2023. The pre-rationalised NCERT was written when T+2 was the rule, and NTA framed this question from it, so the answer given by NTA is T+2. In today’s market, Option (1) is the actual cycle. NTA is still on the T+2 timetable, while the market switched to T+1 back in 2023. The exam is running a little behind the market.
NCERT (Pre-rationalised Edition): “Steps in the Trading and Settlement Procedure It has been made compulsory to settle all trades within 2 days of the trade date, i.e., on a T+2 basis, since 2003. Prior to the reforms, securities were bought and sold, i.e., traded and all positions in the stock exchange were settled on a weekly/fortnightly settlement cycle whether it was delivery of securities or payment of cash. …” “…A new system, i.e, rolling settlement, was introduced in 2000, so that whenever a trade took place it would be settled after some days. Since 2003, all shares have to be covered under the rolling settlement system on a T+2 basis, meaning thereby that transactions in securities are settled within 2 days after the trade date. …” “8. Cash is paid or securities are delivered on pay-in day, which is before the T+2 day as the deal has to be settled and finalised on the T+2 day. The settlement cycle is on T+2 day on a rolling settlement basis, w.e.f. 1 April 2003.” |