BSE charged me high penalty, the reason is I traded on periodic call auction. What is PCA? How to avoid these penalties?

General
2

periodic call auction sessions :

A total of 6 sessions will be held during market hours. Each session will have a duration of 1 hour. First session starts at 09:30 hours and last session ends at 15:30 hours with normal market hours.

Session No

Time Starts From

Time Ends

1

09:30 am

10:30 am

2

10:30 am

11:30 am

3

11:30 am

12:30 pm

4

12:30 pm

1:30 pm

5

1:30 pm

2:30 pm

6

2:30 pm

3:30 pm

Each session of 1 hour is divided into two periods.

1st period is known as order entry period which shall be for 45 minutes duration (This period randomly closes between 44 and 45th minute and is system driven). During this period orders can be placed, modified or cancelled.

Second period starts from 46th minute in which order matching takes places based on the orders entered in first 45 minutes.  This order matching and trade confirmation period is for 8 minutes and remaining 7 minutes is buffer period for smooth transit from one periodic call auction session to another. During this period orders are matched and trade confirmations are sent. NO orders can be placed / modified / cancelled during this period. All unmatched orders during each periodic call auction session for illiquid scrips are purged from system. Trading in these scrips will not be available in continuous trading session and post market close session.

While Limit, Market, Odd Lot, Institutional orders are allowed during periodic call auction session, NO stop loss orders and basket orders are allowed.

Maximum price band shall be 20% for all the scrips in this segment throughout the day, which exchanges may reduce uniformly depending on surveillance actions.

As per SEBI circular no. CIR/MRD/DP/6/2013 of February 14, 2013 a scrip in the exchange is classified as Illiquid, if

1) Daily average trading volume is less than 10,000 during a quarter (For the introduction period the Jan 2013 – Mar 2013 Quarter is considered)

2) Daily Average Number of trades are less 50 in a quarter and

3) The scrip should be classified as illiquid in all the stock exchanges where it is available for trading.

Each scrip is eligible to move out from periodic call auction session only after it continues to trade in that for atleast two quarters and is not classified as illiquid as per above conditions.

If the maximum buy price entered by a client based on PAN No of the client is equal to higher than maximum sell price entered by same client a penalty will be levied (Penalty is applicable only if such orders results into trades). Penalty in such cases shall be on daily basis and will be higher of 1% of trade value (0.5% for buy value and 0.5% for sell value) OR 5000 rupees (2500 rupees for buy trade and 2500 rupees for sell trade). One must be cautious of placing such orders as minimum penalty will be 5000 rupees for each such instance in a day.

Source: http://teluguinvestor.com/blog/equities/periodic-call-auction-session-for-illiquid-scrips/

2 Likes
3

Hi Shiva,

I've sort of explained the "Periodic Call Auction" here.

If in any periodic call auction the buyer & the seller is the same person, a penalty of Rs.5000 is levied by the Exchanges.

2 Likes
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Hi i am trying to understand this but this link is down.Could you please give an example of when exactly will the penalty be charged.?If i were to buy a stock in this category and sell it the same day i will be charged a penalty?

5

Hi @traderprofit

Penalty for certain trades - In the event where maximum of buy price entered by a client (on PAN basis) is equal to or higher than the minimum sell price entered by that client and if the same results into trades, a penalty shall be imposed on such trades. The penalty shall be calculated and charged by the exchange and collected from trading members on a daily basis. Trading members may recover such penalty from clients. The penalty so collected shall be deposited to Investor Protection Fund. Penalty for each such instance per session will be higher of the following:

a. 0.50% of the trade value for sale and 0.50% of trade value for the buy, resulting in 1% penalty for the client on PAN basis. OR b. 2500 /- for the buy trade and 2500 /- for the sell trade, resulting in penalty of 5000/- for the client on PAN Basis.

You can refer to the NSE website on this :

https://www.nseindia.com/products-services/equity-market-periodic-call-auction

There’s also our support article on this :

6

Could you please explain this line:-

“In the event where maximum of buy price entered by a client (on PAN basis) is equal to or higher than the minimum sell price entered by that client and if the same results into trades, a penalty shall be imposed on such trades”

What does this exactly mean ?You cannot place limit orders in these stocks ?Does it mean if a stock is trading @ 200 and i place a buy limit order of 205 and it gets executed i have to pay penalty?I am not clear when exactly does the penalty come into effect?