Rolling Settlement vs Account Period Settlement
Rolling settlement is the system under which each trade is settled individually on a fixed number of days after the trade date (currently T+1 in India), replacing the older account period settlement where all trades during a weekly or fortnightly account period were netted and settled together on a single settlement day.
India's transition from account period settlement to rolling settlement represents one of the most consequential structural reforms in the history of its capital markets. Under the account period settlement system that prevailed until the early 2000s, all trades executed during a defined 'account period'—typically one week or two weeks depending on the exchange—were netted and settled on a single date. This allowed active traders to open and close positions multiple times within the account period without ever taking or delivering securities, effectively turning the settlement period into a built-in carry facility.
The account period system was operationally problematic for several reasons. The settlement dates were concentrated, creating enormous overnight risk at the clearing corporation level. Settlement failures cascaded more severely because many parties were simultaneously failing on the same settlement day. The system also enabled and encouraged excessive speculation—positions could be carried forward indefinitely within the period without any margin requirement equivalent to modern intraday controls, contributing to the market turmoil that characterised several episodes of Indian market history, including the Harshad Mehta securities scandal of 1992.
SEBI progressively dismantled the account period system through the late 1990s and early 2000s. Rolling settlement (T+5, then T+3, then T+2) was introduced incrementally. By April 2003, India moved fully to T+2 rolling settlement across both NSE and BSE. Under T+2, each trade was settled exactly two trading days after the trade date—the buyer received shares and the seller received funds within a two-day cycle. This dramatically reduced systemic risk and aligned India with major global markets.
The next significant reform came in January 2023, when SEBI mandated T+1 settlement for all equity shares, making India one of the first major markets in the world to operate on this settlement cycle. In September 2024, a T+0 optional settlement cycle was also introduced for a subset of stocks. Each acceleration reduces the window during which counterparty default risk can accumulate, further strengthening market stability.