Q.What is 'rolling settlement'? Explain the T+1 settlement cycle followed by Indian stock exchanges.

Rolling settlement treats each trading day's deals as their own batch, settled quickly rather than bunched together.

Rolling settlement is the settlement system under which the transactions executed on each trading day are treated as a separate, self-contained settlement batch, and are settled independently after a fixed, short number of working days — instead of the older system where an entire week's or fortnight's trades were bunched together and settled all at once, which meant money and securities could remain 'in transit', and unsettled, for much longer.

Indian stock exchanges today follow the T+1 rolling settlement cycle: a trade executed on a given trading day, referred to as 'T', is settled — meaning the securities are actually transferred (electronically, via the depository) from the seller's demat account to the buyer's, and the corresponding funds are transferred from the buyer's bank account to the seller's — on the very next working day. For example, a trade executed on a Monday is settled on Tuesday (assuming no holiday intervenes). …

Confusing 'T+1' with a one-day-long gap in placing the order (it refers to the settlement date relative to the trade date, not the order-placement process), o …