Jexj6QMITA/hqdefault.jpg' alt='Bse And Nse Live Software Update' title='Bse And Nse Live Software Update' />Consequences of Short delivery NSEBSE Z Connect by Zerodha Z Connect by Zerodha.Traders,T2 Delivery.What is Short Delivery Equity delivery based trading in India works on a T2 rolling settlement cycle.What this means is that when you buy shares on, say, Monday also called T day, you get the shares on Wednesday T 2 day.Similarly, if you sold the shares on Monday, you are required to give delivery of the shares on Wednesday after which you will get the proceeds from the sale cash to withdraw on Wednesday T2 day.Let us take an example, you bought 1.Arun the Stock Guru Stock tips,Trading Tips,Bse Nse,Share market live,Sensex,Indian Stock market.Inditrade is Indias one of the leading financial services providers of Equity, Commodities, Derivatives investment options and online trading and acquired a name of.Reliance on Tuesday, September 3, 2.Rs. 8. 00 and the seller of these 1.Mr. X although in the markets you dont get to know who you have bought it from.On T2, i. e., Thursday, September 5, you will get delivery of the stock to your demat account and Mr.X will get the sale proceeds equivalent to Rs.But what if you had one of the following situations on hand 1.What if you dont have Rs.An exchange doesnt directly interact with a client.When you as a client make a purchase of any worth, the exchange debits the money from the brokerage firms account that you are trading with.So if a brokerage has let you buy stocks for delivery with no money in your trading account, then the brokerage is obligated to pay for these purchases to the exchange.The broker would then recover the money from you and would also charge you an interest for the money that he has paid on your behalf to the exchange if you delay in payment.What if Mr. X doesnt have the 1.As mentioned earlier, if you sell any stock on T day, you are obligated to deliver the shares on T2.But sometimes it may so happen that you sell some stocks but these stocks are not present in your demat account and hence you would not be able to give delivery of these stocks on T2 and would end up defaulting.This default is called Short Delivery.Now youd be wondering howwhy anyone would sell a stock and not deliver it Well it can happen for various reasons.Here are a few common ones a You sold 1.Reliance for intraday expecting the price of Reliance to go down.If you sell any stock for Intraday you are expected to buy it back by the end of the day to close your position.Now assume you forgot to buy it Now youre left with no option but to deliver these 1.Reliance on T2. Since you dont have any shares, you would not be able to deliver and would default, thereby causing a Short Delivery.Now this cannot happen with your broker as Zerodha is because we let you buysell equities with 2 product codes MIS for Intraday and CNC for Delivery.All Intraday trades boughtsold with the product code MIS would automatically get squared off at 3 2.When you try to sell Reliance with the product code as CNC, the systems will check if you have these shares in your demat account and let you sell only if you do, thereby ensuring that there is no short delivery.You sold 1. 00 shares of Reliance at Rs.Reliance results to be bad.However, news was out that Reliance had done exceptionally well and hence the stock went up and hit the upper circuit at Rs 8.This wont happen on a stock like Reliance but can happen on a lot of illiquid stocks that dont trade on Futures and Options.Assuming the circuit is never released during the day, youd be forced to hold your short position and would have to deliver the shares, failing which the shares would be short delivered.The role of the Exchange is to ensure that if you buy shares, you get credit of the shares.Assuming you buy 1.Reliance from Mr.X and if Mr. X fails to deliver these shares to the exchange on T2, its quite obvious that you would not get these shares.So what happens is the exchange conducts an Auction and buys these shares for you in the Auction market and gives delivery of these shares to you on T3 Friday, September 6 instead of T2.Short delivery is the risk you take when trading BTST Buy Today, Sell Tomorrow, read this blog for more.What happens in an auction market Auction Market.In the Auction session, the exchange invites offers from fresh sellers for quantities short delivered 1.Reliance in the above caseWhen does the Auction happen and who can participate in the Auction market
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