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| Discuss BTST calls at the Equities within the Traderji.com - Discussion forum for Stocks Commodities & Forex; Originally Posted by agupta Agilent, Lets assume you bought 100 ICICI today but you got ... |
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#21
27th September 2006, 11:05 PM
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Re: BTST calls
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No, I do not agree. If you buy & take delivery and you get short delivery, who is penalized? The seller, of course. So even in the case of BTST, the first seller who made short delivery is the party that will be penalized. Now if you, too, were penalized, that would mean double penalties are levied for a single offence! Rgds Kuldeep 
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#22
27th September 2006, 11:09 PM
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Re: BTST calls
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but anyway, lets wait for adeep to clarify how short delivery can occur at all, in a framework where short selling is not allowed. Waiting AGILENT
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#23
27th September 2006, 11:13 PM
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Re: BTST calls
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Because ICICI Direct allows BTST trades in certain scrips. So if you buy and sell under BTST and your seller, A, does not give all the shares, a short delivery results ... first from your seller to your broker (because you already sold and your broker is your agent to collect & deliver on your behalf) ... and then from your broker to your buyer, B. The penalty in the form of loss due to auction would be on your seller, A, only. Rgds Kuldeep
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#24
27th September 2006, 11:17 PM
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Re: BTST calls
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I can understand in the good old days before dmat and online trading , but how now ? AGILENT
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#25
28th September 2006, 10:59 AM
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Re: BTST calls
hi guys,
there has to be a seller for every buyer. now when the seller fails to gives the security (due to shortsell or any other reason) he is penalised through the process of auction, where the seller is obliged to buy the stock with a penalty of 5%. the buyer on his part receives the Auction Credit. (which many errant broker don't pass on) in BTST, you can invite auction if the seller of your first transaction couldn't meet his commitment. it creates a ripple effect where you fail to receive the shares and subsequently you also fails to deliver the same when you sell the same. hope it clarifies. cheers, jdm.
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#26
28th September 2006, 12:04 PM
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Re: BTST calls
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As long as the buyer's loss (in case of auction) is protected in full by the dafaulting seller, I see no problem. But is that protection available , and how is it enforced ? AGILENT
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#27
28th September 2006, 12:18 PM
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Re: BTST calls
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I would agree with you in normal delivery circumstances where there is only one sell and one buy transaction. In that case, the seller who sold short would be penalized accordingly. But in the case of BTST, there are 2 separate corresponding tranactions, 2 sells and 2 buys, all carried within the time frame of the original delivery settlement, i:e T+2. As far as double penalties go, there are 2 separate transactions not one. The original seller gets penalized for his short and you get penalized for your short as you did BTST and not the original seller. Ideally one should wait to get the shares in their demat a/c before initiating any trades on them. Dealing with short deliveries is an inherent risk with BTST they are not that uncommon too (atleast I get my fair share of short deliveries every now and then). Amit
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#28
28th September 2006, 12:50 PM
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Re: BTST calls
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But my question remains unanswered. If the original seller is selling from his Dmat acct, how can a situation of short delivery arise in the first place ?? Also , will the penalty claimed from the defaulting seller be used to reimburse the BTST buyer (the victim I mean) ? AGILENT
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#29
28th September 2006, 12:54 PM
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Re: BTST calls
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hi agilent, the law of the land fully protects the buyer. in fact any auction is a win-win situation for the buyer. cause he not only gets back the money (which he paid while purchasing the stock, but is also entitled for the 5% penalty which the exchanges charges. cheers, jdm.
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#30
28th September 2006, 12:56 PM
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Re: BTST calls
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Here are some facts: 1. Most online brokers (like 5Paisa, Indiabulls etc.) have what they call a 'pool' account. When you buy shares which do not fall under Trade-to-Trade segment, these generally find their way into this pool account rather than your demat account. 2. All brokers including ICICI Direct allow short selling on intraday basis on select stocks. 3. On D+0 day, suppose A short sold 100 shares of XYZ fully expecting to cover the open position at the end of the day. And as the day progressed A covered 50 shares at one time, 25 after 2 hours ... leaving a balance of 25 still uncovered. For some reason or the other, this balance short position did not get covered ... so A has defaulted ... sold something he does not have. Thus in a delivery based market, a shortage of 25 XYZ shares has been created. 4. B bought 100 XYZ on D+1 day and sold under the BTST system on D+2 day to C. He made his profit/loss without taking delivery, but his broker now is responsible to take delivery of 100 ABC on D+3 day and give delivery on D+4 day to C. 5. If B's broker receives only 75 XYZ, he makes good the shortage from his pool account and at the same time initiates a short delivery action by means of which 25 XYZ are bought through auction and cost debited to A. This replenishes the broker's pool account. 6. B's broker then passes on the delivery of 100 XYZ to C. End of story. Penalty is only levied on A. Secondly your answer as to how a short delivery is possible is also answered. Regards Kuldeep
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