Short Delivery

#1
I have recently shortsold some sbi shares. but not able to square off
my positions on the same day. Now , when should i need to settle those
scripts. What are the hidden charges - behind it ?? please
let me know.

Thanx ,
Raju
 

Alchemist

Administrator
Staff member
#2
The exchange will buy shares on your behalf from the auction market and give them to the buyer.

You will have to pay the difference between the rate at which your shorted and the rate at which the exchange has to buy the shares.

As SBI is a liquid scrip. your auction price will be 2%-5% above the current market price.

If the exchange is not able to buy shares in the auction market, it will settle the position in cash
-at the highest recorded price between the relevant trading period and the auction day; or
-at 20 per cent above the last closing price, whichever is higher.

Never ever give a short delivery. If the exchange cannot buy shares in the auction market, you may end up paying minimum 20% more than price you short sold at. SBI is a liquid scrip, so this will not happen in your case.

===================================

Besides the auction rate, you will also have to pay a small cash penalty for a short-delivery. Your broker will also be penalized. Brokers have a point system and get penalized in points. If their penalty points exceed a certain limit within a certain period, they have to pay cash penalty.

Thus brokers don't like clients who give short delivery. If you give short deliveries frequently, your broker may discontinue your account.
 
#3
when will this auction be done ?

let us say .. i shortsold my sbi scripts on friday. i have to settle my shares on tuesday.
when will the market going to go for auction. What if i bought shares on
monday? is there any way .. i can use my newly bought shares against
short delivery??

Thanx,
Raju.
 
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Alchemist

Administrator
Staff member
#4
let us say .. i shortsold my sbi scripts on friday. i have to settle my shares on tuesday.
when will the market going to go for auction. What if i bought shares on
monday? is there any way .. i can use my newly bought shares against
short delivery??

Thanx,
Raju.
Pay-In and Pay-Out takes place on T+2.

Auction takes place one day after the pay-out day (T+3 day).

Auction settlement takes place on (T+5 day).

========================================

No. You cannot use newly bought shares for settling short delivery. The reason is that you will get these shares one day after the pay-out day for your short-delivery.
 

Alchemist

Administrator
Staff member
#6
could you please elaborate more what short delivery means? How is it different from short selling?
Short-selling means selling a stock that you don't own.

It may be done on intra-day basis as well as on delivery basis.

(if you do it on delivery basis, you have to borrow the stock from someone else and give delivery).

If you sell for intra-day, you have to buy back the stock on the same day and "close" your position.

If you don't buy back the stock on the same day and also don't have the stock to deliver, it is called "short delivery".
 
#7
I bought 300 shares of IDEA in Delivery on 2nd june and sold it on 4th june in ATST. Now, I should have the money in my balance today (T+2). But, i didn't have that.

But, i got a mail from my broker states that.

"we would like to inform you that 300 shares of IDEA CELLULAR LIMITED have been received as short delivery. The auction payout settlement for Settlement Number ******** will be on 06-Jun-2008.

Your account will either be credited with funds or you will receive shares in your DP account. "


What it means? Can anybody explain about when i will get the money?
 

Alchemist

Administrator
Staff member
#8
I bought 300 shares of IDEA in Delivery on 2nd june and sold it on 4th june in ATST. Now, I should have the money in my balance today (T+2). But, i didn't have that.

But, i got a mail from my broker states that.

"we would like to inform you that 300 shares of IDEA CELLULAR LIMITED have been received as short delivery. The auction payout settlement for Settlement Number ******** will be on 06-Jun-2008.

Your account will either be credited with funds or you will receive shares in your DP account. "


What it means? Can anybody explain about when i will get the money?
I have moved your post to the relevant thread.

Please read the above posts in Short Delivery.

The person who sold the shares to you, didn't give delivery.

Thus, you will get shares by auction or get a cash equivalent on 6th.

However, you will also have to give a short-delivery and face an auction.

(This risk always exists in ATST. If your seller defaults, you also will be forced to default).

This was a BSE trade - right?

(Read more about settlement cycles of the exchanges).
 
#9
what is the source for this piece of information?

what is the source for this piece of information?

Never ever give a short delivery. If the exchange cannot buy shares in the auction market, you may end up paying minimum 20% more than price you short sold at. SBI is a liquid scrip, so this will not happen in your case.

===================================

Besides the auction rate, you will also have to pay a small cash penalty for a short-delivery. Your broker will also be penalized. Brokers have a point system and get penalized in points. If their penalty points exceed a certain limit within a certain period, they have to pay cash penalty.

Thus brokers don't like clients who give short delivery. If you give short deliveries frequently, your broker may discontinue your account.
 

Alchemist

Administrator
Staff member
#10
what is the source for this piece of information?
Go to NSE's site.

Download NCFM study material for Capital Markets (Dealer's Module).

From page 81 of current material:

Penalties are charged to members for:
(a) failure to fulfil their funds obligations
(b) failure to fulfil their securities deliverable obligations
(c) Gross Exposure & Turnover Violations
(d) Margin Shortages
(e) Security Deposit Shortages
(f) Other violations in respect of client code modifications, non confirmation of custodial trades, company objections reported against the members' etc.
============================

Also see

2.5 Shortages Handling

for information about auctions and close-out procedures.
 
#11
I purchased 27 shares of UB Holdings (purchase price 181 each) and on delivery date I got a message stating as follows:

"For BSE settlement no. 201011250 there is a short delivery of 27 share/s of UB HOLDINGS. These shares may be received through Auction on or after 28-March-11. And the payout/closeout would be credited by 29-March-11."

Now, today i.e. on 29th March, I got a SMS for my linked bank account stating that "my account XXXXXXXXXXX is credited INR 5,870.88 - towards Closeout of BSE N*2........"

I think my total purchase price was INR 4,900 but they gave me 5870, why so?

Is it kind of some compensation to me for not delivery shares in my DP?
 

Alchemist

Administrator
Staff member
#12
I purchased 27 shares of UB Holdings (purchase price 181 each) and on delivery date I got a message stating as follows:

"For BSE settlement no. 201011250 there is a short delivery of 27 share/s of UB HOLDINGS. These shares may be received through Auction on or after 28-March-11. And the payout/closeout would be credited by 29-March-11."

Now, today i.e. on 29th March, I got a SMS for my linked bank account stating that "my account XXXXXXXXXXX is credited INR 5,870.88 - towards Closeout of BSE N*2........"

I think my total purchase price was INR 4,900 but they gave me 5870, why so?

Is it kind of some compensation to me for not delivery shares in my DP?
The shares could not be purchased in the auction.

Thus, the position was closed out on cash basis. The close-out was done 20% above the closing price on day of the auction.

'A', 'B' and 'F' group

The close-out rate is higher of the following rates :

a) The highest rate of the scrip from the trading day to the day on which the auction is conducted for the respective settlement.
b) 20% above the closing rate as on the day of auction/close out of the respective settlement.
http://bseindia.com/about/tradnset.asp#c1
 

Alchemist

Administrator
Staff member
#14
So I gain from this transaction without owning the stock, so just wondering who bears the loss? (Stock exchange?)

Is this gain a candidate of short term capital gain?
The seller who didn't deliver the shares will pay the bill.

I am not sure about the capital gain query, but my opinion is that as there was no delivery of shares it cannot be considered a "capital gain". You can show it as "other income".
 
#15
Short Sell - Doubt

Hi,

If short sold position is not covered when will it go to auction?

For example: If I short sold on Monday, will auction happen on Wednesday or Thursday (no trading holidays in between). Also please give me a rough idea of pricing for the following setup.

Short sell on Monday: Stock closed at 543.(upper circuit).
Tuesday's closing: 588.
Wednesdays Closing: 529, High 604.(Lower circuit hit).
Thursday's closing: 503, High 503 (lower circuit hit).
 

Alchemist

Administrator
Staff member
#16
Hi,

If short sold position is not covered when will it go to auction?

For example: If I short sold on Monday, will auction happen on Wednesday or Thursday (no trading holidays in between). Also please give me a rough idea of pricing for the following setup.

Short sell on Monday: Stock closed at 543.(upper circuit).
Tuesday's closing: 588.
Wednesdays Closing: 529, High 604.(Lower circuit hit).
Thursday's closing: 503, High 503 (lower circuit hit).
Who is your broker?

If a stock was sold on Monday, the auction will happen on Wednesday and settlement will happen on Thursday.

Auctions now happen on T+2 day.

Usually, the auction price is slightly higher than the market price at the time of the auction.

However, if the auction quantity is very large, the auction price can be much higher than the market price or the position may be closed out on cash basis.

Internal shortages are settled according to the policies of the respective brokers. Each broker has a different policy on internal shortages.
 
#17
Short Sell - Doubt

My Broker is Sharekhan

Can I presume then auction price will not be at the high price of Wednesday's trade, i.e, 604?

And when will the auction happen. After Market Hours?

If the stock is locked in Lower circuit, What are the chances the auction price to be same as the lower circuit price or even lower? :):).

Also if locked in lower circuit, I hope there will be some sellers in auction.

Please confirm.

Thank you.
 
Last edited:

Alchemist

Administrator
Staff member
#18
And when will the auction happen. After Market Hours?

If the stock is locked in Lower circuit, What are the chances the auction price to be same as the lower circuit price or even lower? :):).
I am not sure what the auction price will be.

The quantity will decide what the final price will be. Yesterday, 77060 shares of SKS had come up for auction. That's a big number.

There are a limited number of sellers in the auction market and thus sometimes the auction price goes much higher than the market price.

The auction happens during market hours.

On the BSE the timings are 2 PM - 2:45 PM.

The auction for the undelivered quantities is conducted on T+2 day between 2:00 p.m. and 2.45 p.m. for all the scrips under Compulsory Rolling Settlements except those in "Z" group and scrips on "trade to trade" basis which are directly closed-out.
BSEIndia

I am not sure about NSE's timings, but they must in the same range (2 PM and 3 PM).
 
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