If a person is penalized for short delivery and auction penalty is collected from him, to whom does this auction penalty go ? is it to the person who didn’t get delivery because of short delivery ?
I am asking this because if one person do BTST (buy sell and sell tomorrow) and if he got penalized for short delivery, will that be offset by same short delivery he has faced from the person who sold to him without delivery.
Auction penalty goes into the kitty of the exchange investor protection fund. The buyer instead of getting stocks on T+2, gets the stock on T+3 days.
No, the risk of losing on BTST will not be compensated as no money is received because someone defaulted giving you the stocks. Check this post.
You are X.
You buy some shares from Y.
You sell those shares to Z on BTST.
Now Y defaulted in giving you the shares. So Y will be penalized by the exhange for not delivering to you.
Since you dont have the shares, you cannot deliver to Z and will default.
Now X also will be penalized by the exchange.
Both X and Y will be penalized and the money collected will go to the investor protection fund. This is the fund where they keep money to compensate clients in case any broker goes bankrupt, i think so.
X, Y or Z all three will not get any benefit. Z will get the shares and X and Y will get the sale proceedings on T+3
thanks for clearing