Why do the foreign investors have objection to the T+1 trading cycle?

If there is one segment of the market that is against the T+1 settlement proposed by SEBI, it could the foreign portfolio investors or FPIs. Unless they agree, it may be tough for SEBI to really push this idea through as they are a very important component.

SEBI’s T+1 proposal has met with stiff opposition from FPIs with the Asia Securities Industry Association writing to the regulator and the finance minister highlighting the operational difficulty for global investors as they operate across different geographies.

Some of the challenges highlighted include time zone difference, cumbersome information flow process and foreign exchange related issues. Most of the FPIs also have to hedge their net India exposure in dollar terms at the end of the day, which could be tough in T=1.

Normally, the FPI settlement is a tad more cumbersome as receipt of contract notes and order matching tends to often spill over the next day. Since global custodians are also involved in the process, it is already quite cumbersome as it entails confirmations at multiple levels.