Share auction procedure

kolossal · #1 17th March 2006, 11:56 AM

Fellow Investors,
What are the guidelines for share auction procedure.
1. CASE : If you are a buyer in XYZ company for say 3000 shares @ 140 - Delivery of the same shares would be available to you in your Demat Account at T+2days, If there is a availability shortage, what should be your stand against your broker as he has already charged you in the contract note all the charges as per executed transaction.

2. what kind of financial risk are we talking here ." Inspite of the fact that you are the buyer & not defaulter "

3. If you are want the delivery of shares & insist for the same is he under obligation to do it.

4. If he fails to deliver the said quantity 3000 shares, should one demand for compensation of price difference (Auction always takes place at the highest price of the stock within the specified period of auction usually 15 days from T+2)

5. I'm certain there are a few investors who may have faced a situation like this in their trading career.

6. Kindly share our experince & advice

ivanboesky · #2 17th March 2006, 12:03 PM

Your broker has nothing to do with the shortfall, and he is justified in charging you the brokerage/ service tax/ STT etc.
You are not running any financial risk, except for an opportunity loss in case the stock rallies strongly before you get another chance to buy it.
Your broker is helpless in this matter. You cannot force him (or the exchange) for delivery.
You may get the shares in the auction. If you do not get the shares, the trade will be closed out at a price 20% higher than the trade price, and you will get the money.

kolossal · #3 17th March 2006, 12:10 PM

If no trade no charges ?? Isn't this correct If charges - delivery of shares at a later date(Auction date as per announcement by exchange)? As you are the buyer & not defaulter.

ivanboesky · #4 17th March 2006, 12:13 PM

I think you need to be more clear as to what actually happened. Bit confusing... was the trade executed, or wasnt it?

kolossal · #5 17th March 2006, 12:19 PM

Ivanboesky
trade executed - (digitally signed)contract note recd - amount withheld in Ledger with Broker as (Due to broker for said delivery)

ivanboesky · #6 17th March 2006, 12:22 PM

If you have bought the shares but the seller has not made delivery, there is an auction to try and get shares to deliver to the buyer. If during the auction too there are no shares being offered, then you will not get the shares. The original seller will be charged 20% of the trade price and that amount will be credited to you.

kolossal · #7 17th March 2006, 12:28 PM

Ivanboesky,
Which guideline of SEBI(byelaw OR section states) Are SEBI guide lines for Capital market easily accessable. I'm impressed by your speedy replies

Thank you

ivanboesky · #8 17th March 2006, 12:31 PM

Check out

http://www.nseindia.com/content/nscc...qshortages.htm

kolossal · #9 17th March 2006, 12:34 PM

Dude markets are on thanks for the guidance and prompt replies adding you to my buddy list
Cya l8r

aca_trader · #10 17th March 2006, 07:18 PM

Quote:

Originally Posted by kolossal

If no trade no charges ?? Isn't this correct If charges - delivery of shares at a later date(Auction date as per announcement by exchange)? As you are the buyer & not defaulter.

Dear Kolossal,

Ivan has explained all the things very beautifully. One thing I will like to add that failure to delivery happened at the end of the exchange (through another broker or trader). A trader is dealing with exchange and not broker. The broker is only an intermediary and he 'ld be compensated for his efforts.

Best Regards,
--Ashish

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