BSEC plans to cut trade settlement cycle to T+1

The Bangladesh Securities and Exchange Commission (BSEC) has planned to shorten the settlement or transfer of ownership of stocks on exchanges to just one business day.

The regulator planned to allow stock exchanges the option to offer the faster T+1 trade cycle instead of the existing T+2 cycle, which a long-running demand from retail investors, said a BSEC official.

In 2014, the BSEC shortened the settlement cycle to two days (T+2) from three days (T+3).

“Foreigners are used to settle the stock trade in a day. They want T+1 settlement trade cycle to pump more funds in the stock market,” BSEC Commissioner Shaikh Shamsuddin Ahmed told The Business Post on Monday.

“The commission is preparing to launch a T+1 settlement in line with the international standard practice. This will increase the fund flow in the stock market,” he said.

“The shortened settlement cycle would be implemented in phases. First, it will be introduced for the blue-chip companies. Then, it will be introduced for all listed companies,” said the BSEC commissioner.

The market intermediaries and investors welcomed the BSEC’s initiative saying that the move will boost the trading activities.

For a long period, the BSEC has been receiving requests from stakeholders to further shorten the settlement cycle, which prompted the regulator to provide flexibility to stock exchanges to offer T+1 settlement cycle, sources said.

The change to a shorter cycle is likely to benefit retail investors, who will get quicker access to cash and securities after trades are executed. It will also reduce the risks associated with fluctuations of stocks during the settlement cycle.

However, the country’s port city burse Chittagong Stock Exchange (CSE) shortened share trading settlement cycle to T+2 with effect from November 3, 2013.