Short Delivery

#61
Dear Sir,

I believe that the scrip is fairly liquid, so there shouldn't be any problem on the auction front.

Generally, the auction does not happen at the Indiabulls level from what I have heard, so I guess the auction will happen by the exchange.

Now, if the auction happens by the exchange what would be price, would this in the worse case scenario be the highest price on 23rd (t+2) or will this be highest price on 23rd or 20% above closing price of 23rd whichever is higher?

Please let me know, because 20% higher to any closing on 23rd, could mean very deep losses.

Also, if you could shed some light on what would be the penalty that would be levied by the exchange.

Though, it is different thing that my squaring off did not happen because of some internet connection issues, I doubt the exchange would take that into account :(.

regards,
jaideep
 

Alchemist

Administrator
Staff member
#63
Now, if the auction happens by the exchange what would be price, would this in the worse case scenario be the highest price on 23rd (t+2) or will this be highest price on 23rd or 20% above closing price of 23rd whichever is higher?

Please let me know, because 20% higher to any closing on 23rd, could mean very deep losses.

Also, if you could shed some light on what would be the penalty that would be levied by the exchange.

Though, it is different thing that my squaring off did not happen because of some internet connection issues, I doubt the exchange would take that into account :(.
The auction will happen on 23rd. So the highest possible price in the auction will be 20% above the closing price of 22nd.

In case the shares the not bought in the auction, the close-out price will be:

Close out will be at the highest price prevailing in the NSE from the day of trading till the auction day or 20% above the official closing price on the auction day, whichever is higher.
http://www.nseindia.com/content/nsccl/nsccl_eqcloseout.htm

Also, I believe 300 shares will be auctioned as at the end of the day that was the quantity which was short sold by me.
Your first statement was that you traded 100 shares five times, so I thought you sold 100 shares the third time too.
 
#64
Sir,

Thank you for painstakingly answering all my queries, i really appreciate it. Could you please let me know if there is any penalty that would be charged by the exchange, in addition to the above mentioned mechanism.

Regards,
Jaideep
 
#66
Sir,

One other thing I wanted your opinion on, in a best case scenario, if the share price falls (like in the present case jet airways is quoting at 328 odd while I type this, I short sold it at around 352), is the profit shared with the client (assuming that a successful auction takes place) or does the money go to investor protection fund, I happen to read somewhere that the money goes to the investor protection fund.

Regards,
Jaideep
 

Alchemist

Administrator
Staff member
#67
One other thing I wanted your opinion on, in a best case scenario, if the share price falls (like in the present case jet airways is quoting at 328 odd while I type this, I short sold it at around 352), is the profit shared with the client (assuming that a successful auction takes place) or does the money go to investor protection fund? I happen to read somewhere that the money goes to the investor protection fund.
Investors are not allowed to make profits from short deliveries.

However, in case, auction/ close-out price is lower than standard price, the difference is not given to the seller but is credited to the Investors Protection Fund.
BSE - FAQ's

The above is for exchange level shortages.

I am not sure what other brokers do for internal shortages, but Kotak Securities follows the above principle for internal shortages.
 
#68
Hi Alchemist, I have short sell United Spirits 50 @ 629 on 02042012. But I could not square off it today due to some problem. The stock has closed @ 637.35.

Please let me know the worst scenario?
 

Alchemist

Administrator
Staff member
#69
Hi Alchemist, I have short sell United Spirits 50 @ 629 on 02042012. But I could not square off it today due to some problem. The stock has closed @ 637.35.

Please let me know the worst scenario?
United Spirits is in the derivatives segment and thus the potential of loss is unlimited.

There are no circuit limits in the derivatives segment. That means United Spirits can rise to any level in a single day.

The auction will be held tomorrow and the auction price will be higher than the market price of the stock.
 
#70
Depending on whether the shortage is at broker level or exchange level, the broker or the exchange will buy the shares
Hi, can you clarify on what is shortage at exchange or broker level. When I short the shares, do I borrow them from broker? If the broker is at shortage of those shares, then, will I have to pay the penalty ?

Let's say, I sold of shares of a company on a day and purchased them the same day just before 3:00 to square off in intraday. Now, will I be certain that there will not be any auctioning or physical delivery etc ?
 
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Alchemist

Administrator
Staff member
#71
Hi, can you clarify on what is shortage at exchange or broker level. When I short the shares, do I borrow them from broker? If the broker is at shortage of those shares, then, will I have to pay the penalty ?

Let's say, I sold of shares of a company on a day and purchased them the same day just before 3:00 to square off in intraday. Now, will I be certain that there will not be any auctioning or physical delivery etc ?
Brokers only have to deliver their net obligations to the exchanges.

Suppose 2 clients of a broker trade in ABC Limited.

Client 1 buys 200 shares on NSE and Client 2 sells 100 shares on NSE.

The net position of these trades is a buy position of 100 shares.

The broker will only get 100 shares from NSE. The broker will get the remaining 100 shares directly from Client 2.

If Client 2 fails to deliver the 100 shares, it will be an internal shortage (shortage at broker level). The exchange will not hold an auction for these shares (except if the broker requests).

The broker is responsible to deliver 200 shares to Client 1.

For the 100 shares that Client 2 didn't deliver, the broker can (depending his policies)

a. purchase the shares from the open market; or
b. close-out the position on cash basis; or
c. request the exchange to hold an auction. (I think this option is available on BSE only).

Self-Auction

The Delivery and Receive Orders are issued by BSE to the Members after netting off their purchase and sell transactions in scrips where netting of purchase and sell positions is permitted. It is likely in some cases, a selling client has failed to deliver the shares sold in a settlement to a Member. However, this may not result in failure of the Member to deliver the shares to the Clearing House as there was a purchase transaction of his some other buying client in the same scrip and the same was netted off for the purpose of settlement. In such a case, the Member would require shares so that he can deliver the same to his buying client, which otherwise would have taken place from the delivery of shares by his selling client. To provide shares to the Members in such cases, they have been given an option to submit the details of such internal shortages on floppies on pay-in day for conducting self-auction (i.e., as if they have defaulted in delivery of shares to the Clearing House). These shortages are clubbed with the normal shortages in a settlement arrived at by the Clearing House and the auction is conducted by the Clearing House for the combined shortages.
BSEIndia

If you sell shares and repurchase them on the same day, there will be no delivery involved. It will be a simple intraday trade.
 
#72
For the 100 shares that Client 2 didn't deliver, the broker can (depending his policies)

a. purchase the shares from the open market; or
b. close-out the position on cash basis; or
c. request the exchange to hold an auction. (I think this option is available on BSE only).
Thank you for the information.

Can you please tell me me what is open market? Will the buying client really agree to close out on cash basis? He might be of an opinion that the stock is going to open with 3% increase in the current value tomorrow so I need the stock & not money?

Also is there any way I can find out what options do brokers prefer ? e.g. Sharekhan.
 

Alchemist

Administrator
Staff member
#73
Can you please tell me me what is open market? Will the buying client really agree to close out on cash basis? He might be of an opinion that the stock is going to open with 3% increase in the current value tomorrow so I need the stock & not money?

Also is there any way I can find out what options do brokers prefer ? e.g. Sharekhan.
The normal market that we all trade in, is the open market and everyone can buy/sell in that market.

The auction market is a separate market.

If a broker sells a particular stock, but doesn't deliver the shares, he is not allowed to participate in the auction market when those shares come up for auction.

For internal shortages, the buying client doesn't have a choice. He has to accept whatever the broker gives him - shares or cash.

Usually the close-out price is much higher than the market price and thus the buying clients don't have a reason to complain.

All brokers have different policies for internal shortages and it is mandatory for all brokers to mention their internal shortage policies on their respective websites.

Just check the websites of different brokers and you will know their policies for internal shortages.

Sharekhan's policy is as follows:

Shortages in obligations arising out of internal netting of trades

Internal Shortage Policy

BSE has a window wherein internal short deliveries can get auctioned as per the normal auction process. Internal short deliveries are not covered by the Auction conducted on the NSE. It is due to this limitation on the NSE we follow the procedure as mentioned below

1. The client may not receive shares on T+2 in case there is an internal shortage situation within Sharekhan, i.e. the buyer and seller are both Sharekhan clients and the seller defaults in delivery due to which the buyer may not receive the shares.

2. In case of an internal shortage, firstly the defaulting seller would be debited with a value as on the previous day of the payin day + 30 % for the default till such time the auction process can be completed.

3. In case there is an internal shortage in BSE, the exchange conducts an auction through which the shares would be purchased and delivered to the buyer. The seller would be debited at the rate at which the exchange would have purchased these shares. Additionally, brokerage, statutory costs and other incidental charges including penalty for non-delivery may be debited to the client. In case the exchange is unable to purchase these shares, the exchange will inform Sharekhan of a close out rate, at which the buyer would be allowed credit and the seller would be debited for the same amount.

4. In case there is an internal shortage in NSE, Sharekhan purchases the shares from the normal market and provides the shares to the buyer, on receipt of delivery. The defaulting seller would be debited with the rate at which these shares were purchased, including the brokerage, statutory charges and other incidental charges including penalty if any. In case of non receipt of delivery to purchase the shares, the buyer would be offered credit at a close out rate applicable on T+4 day + 3% or and the seller would be debited at the same rate. In case where Sharekhan is unable to purchase the shares on account of the scrip being in buying circuit, the position would then be closed out on the closing price of the exchange on T+2 at the circuit percentage of 2 days.
http://www.sharekhan.com/downloads/SharekhanPolicies.pdf
 

Alchemist

Administrator
Staff member
#74
I am doing my tax calculations for FY 2016-2017.

I lost Rs 47611 because of short deliveries in FY 2016-2017 (six different stocks).

:stupido:

The biggest losses came when the stocks were locked in upper circuit.
 
#75
Is there any way to find out whether the shares bought by me are delivered short. I want to know whether SGBAUG24 bought in NSE on 29th June was delivered short.

I received a SMS that these bonds are delivered short, but Sharekhan is denying that it is delivered short. It is long story to explain here but if the delivery for this is short than very likely Sharekhan cheated me for around Rs 30000.
 

Alchemist

Administrator
Staff member
#76
Is there any way to find out whether the shares bought by me are delivered short. I want to know whether SGBAUG24 bought in NSE on 29th June was delivered short.

I received a SMS that these bonds are delivered short, but Sharekhan is denying that it is delivered short. It is long story to explain here but if the delivery for this is short than very likely Sharekhan cheated me for around Rs 30000.
There is no way expect if you complain to SEBI?

How exactly did they cheat you?
 
#77
There is no way expect if you complain to SEBI?

How exactly did they cheat you?
Regarding SGB Bonds, they cant be transferred from NSDL to CDSL or vice versa. As my Demat with Sharekhan is NSDL, if they receive the delivery in CDSL account, then that can't be transferred to NSDL account. I have linked my RKSV CSDL account with Sharekhan so that they can credit such bonds in my CDSL account just in case the delivery is received in CDSL account.

But Sharekhan does not automatically transfers these bonds in my CDSL account. Everytime I receive a delivery in CDSL account, I have to raise a request to transfer to my demat account. Also I asked them multiple times that atleast you should send some communication regarding this but they told me that they cant send any communication. So everytime I purchase SGB bonds I need to check whether the bonds are credited to my NDSL account. If It is not credited, then I raise a request to transfer it to CDSl account. Depending upon person handling the case they transfer the bonds to CDSL account anytime within 1 day to few weeks.

I am regularly trading in SGB bonds and also trying to track it and request everytime I receive delivery in CDSL account. But Inspite of taking enough care, there is still some probability that I may miss out on some transaction. I bought 2 bonds on 22nd June and 12 bonds on 29th June. The delivery for 22nd June was not credited to my NDSL account. I realized this on 1st July. As expected they never automatically credit these bonds in my CDSL account. Then on July 1st I raised a request to transfer these bonds to my CDSL account. But then on 3rd(Settlement date of trade date 29th June), I received an SMS that 12 bonds of SGB is received short. But I saw credit of 12 bonds in my CDSL account on 3rd June, but still did not receive two bonds. I was surprised how can 12 bonds be credited to my CDSL account when it is received short. Also everytime I have to raise a request to transfer it in to my CDSL account but this time it happened without raising the request. Third even after raising the request it takes some time to credit it in CDSL account but here it happened on same day. Anyways as I received the bonds I did not bother that much.

On 5th July I talked with senior person in Sharekhan regarding 2 quantity purchased on 22nd June, she told me that 2 quantity would be credited that day and remaining 12 quantity was delivered short so would be credited in next 2 days. I told her that I have already received 12 quantity in my Demat.

After talking to her I give a thought whether 12 bonds received on 3rd July was corresponding to bonds purchased on 29th June. It is highly unlikely that they credit the bonds on 3rd July for 29th June as the delivery was short, second I never raised a request and third it never gets credited same day. One possibility could be that I already had 10 bonds in Sharekhan's pool account and 2 bonds purchased on 22nd June make it 12. They credited these 12 bonds. It was just a coincidence that both quantities are same. I got confused and assumed that the 12 bonds were credited for 29th June trade whereas this may not have any relation to trade dated 29th June.

But Now Sharekhan is saying that I myself agreed that I received credit of 12 bonds. They are asking me to ignore the message for Short delivery and said this was sent by mistake. I checked my statements for June that seems matching but I do not have enough data whether 12 bonds credited were for trade dated 29th June or for previous delivery. Sharekhan is saying that they have credited the bonds I am 50-50%.
 

Alchemist

Administrator
Staff member
#78
One possibility could be that I already had 10 bonds in Sharekhan's pool account and 2 bonds purchased on 22nd June make it 12.
Maybe the bonds belonged to someone else.

If there was an internal shortage, Sharekhan must have taken the bonds from its own pool account and delivered to you.

Did you get another 2 bonds?
 

Atiker

Active member
#79
Regarding SGB Bonds, they cant be transferred from NSDL to CDSL or vice versa. As my Demat with Sharekhan is NSDL, if they receive the delivery in CDSL account, then that can't be transferred to NSDL account. I have linked my RKSV CSDL account with Sharekhan so that they can credit such bonds in my CDSL account just in case the delivery is received in CDSL account.
Curious, why not buy and sell via RKSV for CDSL only bonds, why bother with Sharekhan?

What am I missing?
 
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