All the trades in screen based trading of securities are settled on what basis?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → T+2 basis
Option (1) T+3 basis — Incorrect. The book gives two days after the trade date, not three.
Option (2) T+1 basis — Incorrect as per the book. The book gives T+2. However, T+1 is the cycle actually followed in India today (Note 2).
Option (3) Within same day — Incorrect. The book never speaks of settling a trade on the day it is made. Settlement needs time for the buyer to pay and the seller to hand over the shares.
Option (4) T+2 basis — Correct as per the book. Under rolling settlement, each day’s trades are settled a fixed number of days after the trade date (T). The whole week’s trades are no longer settled together on one date. The book says it has been compulsory to settle all trades within 2 days of the trade date since 2003.
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: The pre-rationalised NCERT was written when T+2 was the rule, and NTA set this question from it, so the answer given by NTA is T+2. SEBI has since shortened the cycle. Stocks moved to T+1 in phases from February 2022, and all stocks have been settled on T+1 since 27 January 2023. So in today’s market, Option (2) is the actual cycle. Your broker settles in one day now, but this question still settles in two. In the exam, go with the book.
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. …” “…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.” |