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SEBI implements T+2 bonus share trading from October 1

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Synopsis:

SEBI has announced the implementation of a T+2 framework for bonus share trading, effective from October 1, 2024. This change reduces the time for crediting and trading bonus shares, streamlining processes and improving liquidity in the market.

SEBI news today

The Securities and Exchange Board of India (SEBI) has introduced a significant update to its bonus share trading framework. Starting October 1, 2024, SEBI will implement a T+2 settlement system for bonus shares. This update aims to improve market efficiency by reducing the time between the record date and the availability of bonus shares for trading.

Streamlining bonus share trading

Under the previous system, delays in crediting and trading bonus shares often resulted in inefficiencies for investors. The introduction of the T+2 framework ensures that bonus shares will now be credited and available for trading just two days after the record date, a substantial improvement from the existing system. This change simplifies the process and reduces administrative burdens.

Key changes in the new framework

Several important changes have been introduced as part of SEBI’s updated guidelines:

  • Companies must seek in-principle approval from the stock exchange within five working days after their board approves the bonus issue.

  • The day after the record date will be considered the "deemed date of allotment." On this date, the stock exchange will release a notification detailing the number of bonus shares issued and the date of allotment.

  • Companies are required to submit all necessary documents to depositories by 12 noon the next working day after the record date.

  • Bonus shares will be credited directly to shareholders' accounts under the same ISIN as the existing equity shares, eliminating the need for temporary ISINs.

These changes will allow bonus shares to be available for trading the day after the allotment is confirmed, expediting the entire process.

Penalties for non-compliance

To ensure adherence to the new timelines, SEBI has outlined penalties for companies that fail to comply with the updated regulations. These penalties will be enforced in line with SEBI’s circular issued in August 2019, which governs non-compliance with SEBI's Issue of Capital and Disclosure Requirements (ICDR) Regulations.

Impact on market liquidity and efficiency

The shift to the T+2 bonus share trading framework is expected to significantly enhance market liquidity and improve investor confidence. By reducing the time investors must wait before trading their bonus shares, SEBI aims to modernise the Indian securities market and boost efficiency.

Furthermore, stock exchanges and depositories will be required to align their rules and regulations with SEBI’s updated guidelines, ensuring consistency across the market.

The new T+2 bonus share trading system is set to streamline the process, benefitting investors and enhancing market liquidity. With the improved framework, the SEBI share price is likely to be impacted positively as investors embrace the faster and more efficient system.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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