BTST calls

adeep_b · #11 27th September 2006, 12:00 AM

Hi agilent,
I am not going out of the topic. Let me explain the concept of BTST to all of you.
When u buy some shares as delivery, they come in ur account on T+2 days. If ur not using the funding of ur broker(that means ur not using ur broker's money) ur shares will directly come in ur demat account. Say if u want to sell these shares, then there is a transaction charge levied on per crip(i.e 15-20 rs/scrip).
What happens in BTST...U buy shares today & sell them tomorrow that means they donot come in ur account. Then how come they get settled of. This is settled by ur Brokers with the particular exchange. The shares get settled of at the brokers end. U neednot worry about them.
Now the question is , Is it allowed in all the scrips...the answer is no....Excluding T-to-T scrips(trade to trade) all the shares can be done BTST.
This service is available with select brokers. I will not take their names, otherwise the people will think I am advertising..
The brokerage charged is of Delivery......

Anything else u guys want to ask...feel free.....

adeep_b · #12 27th September 2006, 12:03 AM

also take into note BTST has to be done in the same exchange....i.e if u bought in NSE then u hav to sell them in NSE...same in BSE....intersettlement wont work here...This is really imp otherwise ur shares will go into auction....

aad · #13 27th September 2006, 12:56 AM

Quote:

Originally Posted by Agilent

Swagat
Couple of times is too small a sample to base your advice on, Swagat. Short deliveries could arise just once in say many hundred deals, but that once could be failry loss making, specially for volatile stocks.

All this in theory of course .

The ICICI rules penalise the original buyer for short delivery for the sale he commits to. This , to me appears starnge as auctions usually apply to short deliveries in cash markets and affect only sellers , never buyers

Experts... pl come in

AGILENT

Hi Agilent,

I am NOT an expert.. however here is what I feel.

You are right when you say "auctions" refer to short deliveries and penalise "sellers". To me, ICICI is not an exception and follows the same principle. Lets assume that as a buyer, you received short delivery. If you had waited till actual delivery cycle (and not sold in BTST), the original seller would have been penalised and you would have received auction benefits. So till this point we (u,me, ICICI... everyone) are in sync..

Now, when you sell in BTST, you become buyer as well as seller. The way you receive auction benefits as buyer, you also face auction losses as seller... so general rule of penalising the seller is still adhered to.

Regards,

Abhay

Agilent · #14 27th September 2006, 09:22 AM

Quote:

Originally Posted by adeep_b

Hi agilent,
I am not going out of the topic. Let me explain the concept of BTST to all of you.
When u buy some shares as delivery, they come in ur account on T+2 days. If ur not using the funding of ur broker(that means ur not using ur broker's money) ur shares will directly come in ur demat account. Say if u want to sell these shares, then there is a transaction charge levied on per crip(i.e 15-20 rs/scrip).
What happens in BTST...U buy shares today & sell them tomorrow that means they donot come in ur account. Then how come they get settled of. This is settled by ur Brokers with the particular exchange. The shares get settled of at the brokers end. U neednot worry about them.
Now the question is , Is it allowed in all the scrips...the answer is no....Excluding T-to-T scrips(trade to trade) all the shares can be done BTST.
This service is available with select brokers. I will not take their names, otherwise the people will think I am advertising..
The brokerage charged is of Delivery......

Anything else u guys want to ask...feel free.....

Thanks Adeep, that was useful.

But u havnt explained why the buyer shd face the risk of capital loss if there is short delivery by the original seller (counterparty) leading to auction

Perhaps u can take us all slowly thru this mechanism and the risks and obligations of all parties to the transactions ... no hurry

AGILENT

kuldeep49 · #15 27th September 2006, 12:45 PM

Quote:

Originally Posted by Agilent

Thanks Adeep, that was useful.

But u havnt explained why the buyer shd face the risk of capital loss if there is short delivery by the original seller (counterparty) leading to auction

Perhaps u can take us all slowly thru this mechanism and the risks and obligations of all parties to the transactions ... no hurry

AGILENT

Agilent,
To the best of my knowledge, the penalty is only on the first defaulter for otherwise every short delivery in BTST could have a cascading effect.
Regards
Kuldeep

agupta · #16 27th September 2006, 07:48 PM

Quote:

Originally Posted by Agilent

Thanks Adeep, that was useful.

But u havnt explained why the buyer shd face the risk of capital loss if there is short delivery by the original seller (counterparty) leading to auction

Perhaps u can take us all slowly thru this mechanism and the risks and obligations of all parties to the transactions ... no hurry

AGILENT

Agilent,

Lets assume you bought 100 ICICI today but you got only 90 due to short delivery. Now in normal delivery circumstances, you would know that you have received short delivery come settlement at T+2 and you would have no risk as the short delivery is the seller's fault.

Now if you were to BTST the 100ICICI, you don't know that you have got short delivery of 10 and so you go ahead and sell 100 ICICI (becaue you assume you have 100 as the actual qty comes to front only after T+2) which in turn makes you the seller who has sold ICICI 10 short. In this case you would face some penalties as the share would go in auction.

A point to be noted here is that it is not necessary that you would always be at the receiving end for selling short. If the price of the scrip drops below your sell price, you actually gain that difference. You would only end up losing if the price of the scrip keep moving up. Also some brokers cover their clients for short deliveries as they make up for the shorts from their own stocks which makes it much safer. I don't know if any of the big ones do it though so you might have to look before you leap.

Hope I have been able to clear your queries.

agupta · #17 27th September 2006, 08:02 PM

Quote:

Originally Posted by kuldeep49

Agilent,
To the best of my knowledge, the penalty is only on the first defaulter for otherwise every short delivery in BTST could have a cascading effect.
Regards
Kuldeep

Kuldeep,
It would only have a cascading effect if we were to assume that everybody who buys the short delivery goes ahead and does BTST.
Regards
Amit

mrktMC · #18 27th September 2006, 09:28 PM

Quote:

Originally Posted by Agilent

Thanks Adeep, that was useful.

But u havnt explained why the buyer shd face the risk of capital loss if there is short delivery by the original seller (counterparty) leading to auction

Perhaps u can take us all slowly thru this mechanism and the risks and obligations of all parties to the transactions ... no hurry

AGILENT

Hi Agilent and Rahul,

BTST: if we take it this way hope you will get it:

Suppose Kapil buys 100 shares of ICICI on 26th sept for doing BTST and sell it very next day now as Kapil bought it on 26th sept and is selling tomorrow it will be considered as a delivery after market closes of 26th Now this 100 shares of ICICI will go into the process of settlement and will come into Kapils delivery account (demat account) now as kapil has sold it very next day these 100 shares will be bought by someone else or many others now when the NSE goes for final settlement that is delivery to your demat account and found that the shares you bought from a seller where short in quantity suppose 90 and you doing BTST sold 100 so NSE has to deliver 100 shares to those who bought it now the question is ? there are only 90 shares and you sold 10 shares which never belonged to you. for short supply of 10you will get the refund but with out confirming the delivery of your 100 shares you sold them. You will attract auction that is penalty for those 10 shares you sold. Hope am able to clear the point and if there is something else any one has to add please go ahead.

warm regards,
MrktMc

rahul_trader · #19 27th September 2006, 10:19 PM

Thank you everyone on this section for your efforts.

Agilent · #20 27th September 2006, 10:49 PM

Quote:

Originally Posted by agupta

Agilent,

Lets assume you bought 100 ICICI today but you got only 90 due to short delivery. Now in normal delivery circumstances, you would know that you have received short delivery come settlement at T+2 and you would have no risk as the short delivery is the seller's fault.

Now if you were to BTST the 100ICICI, you don't know that you have got short delivery of 10 and so you go ahead and sell 100 ICICI (becaue you assume you have 100 as the actual qty comes to front only after T+2) which in turn makes you the seller who has sold ICICI 10 short. In this case you would face some penalties as the share would go in auction.

Hope I have been able to clear your queries.

Well explained adeep. But I have a rather basic question.

On ICICI Direct one can't short sell, correct ? (One can sell only what one has in his/her Dmat acct, in full or part)

If that is true, then how can short delivery arise at all ?

AGILENT

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