Share Shortages for NSE

[xtalk]

I'm building my portfolio for long term. I don't know where the bottom will be. I saw value. I always invest when there is a selling climax. For example, you may not get SBI at July lows.

thanks.

 

[xtalk]

Update: OK, I got a reply from my broker regarding the shortage of shares. I was curious how the auction process works....

Please be informed that for all the Trades carried out by the client through the Exchange, (NSE) has designed a uniform Settlement system.
According to this Settlement system, Normal Settlement of all the Trades
carried out by the client on T Day is on T+2 basis.

However, in cases where there is a Buyer Shortage from the Exchange, Settlement of the said trade is deferred till the Auction Settlement Date, which is on T+5 basis & Trade may be settled either on Delivery basis or
Close Out Proceeds is credited to the client's Trading Account.

Buyer Shortages could happen in the following 2 instances:

- Buyer is a client of HDFC Securities Limited, whereas Seller is a
third-party Broker -Shortage from the Exchange
- Both Buyer & Seller are clients of HDFC Securities Limited - Internal
Shortages

Cases, where the Buyer Shortage is from the Exchange, guidelines prescribed by the Exchanges are adopted, whereas, if the Shortages are Internal, Trade is compulsorily closed-out on the "Auction Settlement" Day.

Close-out Price in both the scenario is worked out in the following manner:

In case of Exchange Shortages, Highest price prevailing on the Exchange from the first day of the relevant trading period till the day of closing out Access


20% above the official closing price on the Auction Day for Internal
Shortages & 20% above the official closing price on the Auction Day for
Third Party Broker Shortages

And

In case of Internal Shortages, Trade is compulsorily closed-out on the
Auction Settlement Day & the Settlement price is worked out as:

Highest price prevailing on the Exchange from the first day of the relevant
trading period till the day of closing out

Or

10% above the official closing price on the auction day, whichever is higher

Please be informed that it is the first obligation of the Exchange to
Settle your Trade by giving you credit of Delivery of shares purchased by
you. If on T+2 there is a Buyer Shortage & the shares are bought by
Exchange in the Auction Market, then penalty levied from the Seller will be
passed on to Third-Party who would participate in the Auction Market & give
Delivery of his shares, which will be credited to your Demat Account as
Auction Payout.

Gains / Losses arising due to the Price Fluctuations in the given scenario,
are to be borne by the client.

In your case, the Auction Settlement is on 16 Oct 08, hence we will get the
confirmation from exchange on 16-Oct-2008 whether shares or funds will be
credited to your account as Aution Payout and same will be informed to you
separately.

I hope this will help other members. Thanks!

 

[vasa1]

Hi X-talk,

Thanks for the post from HDFC Sec. It is a little difficult for me to understand but the last part, addressed to you, seems straightforward:

In your case, the Auction Settlement is on 16 Oct 08, hence we will get the
confirmation from exchange on 16-Oct-2008 whether shares or funds will be
credited to your account as Aution Payout and same will be informed to you
separately.

In my case, I got the cash credited and not the shares delivered.

I still have to figure out how the amounts relate to each other ...

 

[xtalk]

Vasa,

Please talk to your broker. They MUST issue contract note for every transaction buy/sell/auction or whatever. It'll help during tax filling and calculating capital gain/loss.

Thanks!

 

[xtalk]

Update from by broker:

On Auction day, we have received the delivery of XXX share/s against your buyer shortage for NSE settlement xxxx which is transferred to your demat a/c.

 

[vasa1]

Update from by broker:

Will you get some money as well? Did you check your ledger?

 

[vasa1]

Vasa,

Please talk to your broker. They MUST issue contract note for every transaction buy/sell/auction or whatever. It'll help during tax filling and calculating capital gain/loss.

Thanks!

Hiya and Season's greetings:

I finally got my contract note for the auction by snail mail. Just to sum up:I bought shares (for delivery) costing me Rs. 1155.52 (incl. brokerage, taxes, etc).

Since I didn't get delivery, I got cash = Rs. 1214.88. Repeat, no shares, but cash instead.

 

[xtalk]

I got shares only, but prices have fallen more. So, I'm planning to invest little more

tnx

 

[vasa1]

From your example, my example, and a friend's example (he has an account with Asit C. Mehta), I think that different brokers have different ways of dealing with auctions! I really wish others would post their experiences as well so we could get a better picture.

 

[vasa1]

Looks like one more auction for me. Got an e-mail from the broker... I suspect it will go as the previous one I described, my initial amount plus a little more in lieu of shares.

Good news in a falling market .