I have purchased 719GOI2060 BSE G group today. Can I sell them same day?
I am also interested in knowing about this. Please share if someone has knowledge about this matter
Also, a thing that I noticed when purchasing G-Secs in Zerodha, unlike Equity which appears in the Holdings section from the next day onward (with a T1 symbol), G-Secs only appear in Holdings section after the T+2 days have passed
Does anyone know about this? @siva @Bhuvan
Also, an interesting thing happened. I had purchased a few units of GOI bonds at the end of last week on NSE and its settlement had to happen on 1st September. But I got an email from Zerodha saying that those bonds were short delivered (Refer to screenshot below). Is short delivery common in GOI Bonds?
What was the likely reason that short delivery happened in this particular G-Sec given that neither it hit any circuits nor was there any liquidity issue (this particular G-Sec is very liquid compared to other G-Secs)?
I am not sure about the reason.
i guess in this case you will get profit from this. It will be sold around 10-20% above the T+1 closing price
I searched about this and it seems that it isn’t possible for the buyer to profit. In some (rare) cases, even the person who short delivered might end up profiting. This thread explains about those scenarios in detail
In my last response, things got a bit mixed up. My main question is still regarding the possibility of doing intraday in GOI bonds? Does anyone know if it is possible to do that? The reason I didn’t want to try testing it is because of RBI Notification that I came across which mentioned about having the GSec in possession before shorting it. Even though that applies to another platform (NDS-OM), I didn’t want to try because a default in a short sale transaction in GSec has penalties prescribed by RBI. Do all these rules/penalties even apply to retail investors as well?
Entities undertaking short sale transactions and the related cover transactions, shall tag those transactions in NDS-OM appropriately. The ‘short sale’ tag in NDS-OM shall of the entity but will be received by the time of settlement (e.g., securities used to avail of intra-day liquidity, securities placed as margin with clearing houses, etc.).
Any default on a short sale transaction shall be subject to penal measures as prescribed in RBI circular IDMD.DOD.17/11.01.01(B)/2010-11 dated July 14, 2010 as amended from time to time. Reserve Bank may also take additional action including temporary or permanent debarment of the SGL account holder from the short sale market as it may deem fit, for violation/circumvention of the regulatory guidelines or if Reserve Bank is of the view that the participant has attempted to manipulate the market, involved in market abuse, or provided information that was incorrect, inaccurate, or incomplete.
I don’t think intraday is not allowed in these securities. Because the NSE group in which these are traded is GS, if intraday was not allowed then it would have been GT, just like MT or ST group. So, I think intraday is allowed here.
My statement was incorrect. Buyer can also profit in an auction if it is a close-out (personally experienced this scenario)
But . How will the buyer come to know if it was closeout or not .
It all depends on the trust goodfaith goodwill honesty of the broker
Am i right ?
Is “close-out” credit to buyer ; applicable to all the types and all category of shares ?
Some amount of trust is required but @VenuMadhav had explained a method to find out if the broker had passed the close-out credit in certain specific situations in a different thread -
From what I am able to find, It seems to be applicable for Equities (refer to this page) as well as debt instruments (refer to Page 6 onwards of this document)
All types e.g A , B , c , t , x
The BSE website explains the close-out procedure for various groups -
Close-out is effected for cases when no offer for a particular Security is received in an auction or when Members who offer the Securities in auction, fail to deliver the same or shortages pertaining to those groups of securities for which auctions are not conducted. The close-out rates for different segments are as under
‘A’, ‘B’ and ‘F’ group
The close-out rate is higher of the following rates :
- The highest rate of the Security from the trading day to the day on which the auction is conducted for the respective settlement.
- 20% above the closing rate as on the day of auction/close out of the respective settlement.
“Odd Lot”, “T” and “Z” group and Patawat objections
The closeout rate is higher of the following rates:
- The highest rate of the Security from the day of trading to the day of auction of the respective settlements;
- 10% above the closing rate as on the day of auction/ close out of the respective settlement.
In case of shortages in “G” group, the shortages are closed out at Zero Coupon Yield Curve (ZCYC) plus a 5% penalty.
The closeout amounts are debited to the bank accounts of those Members who have failed to deliver the securities against their sale obligations and credited to the bank accounts of those Members who had bought the securities but did not receive the same.
Details about X group stock’s close-out procedure isn’t mentioned. Not completely sure, but maybe they are treated as a subgroup of some other group for the settlement/auction procedure.
On the NSE website, the series of securities are not mentioned but close-out procedure for different situtations has been explained -
Closing out in the case of failure to give delivery for Normal Market
Close out will be at the highest price prevailing in the NSE from the day of trading till the auction day or 20% above the official closing price on the auction day, whichever is higher.
Closing out in case of failure to give delivery for ‘IL’ and ‘BL’ Market Deals
Any shortages in the ‘Inter Institutional’ – IL segment and ‘Block trades’ – BL window will be directly closed-out on the settlement at the highest price prevailing in the Exchange from the day of trading till the T+1 day or 20% above the official closing price on the T+1 day, whichever is higher, or as declared from time to time.
Closing out in case of failure to give delivery for Trade-for-trade – Surveillance (TFT-S) deals
Any shortages in TFT-S will be directly closed-out on the settlement at the highest price prevailing in the Exchange from the day of trading till the T+1 day or 20% above the official closing price on the T+1 day, whichever is higher, or as declared from time to time.
Closing out in case of failure to give delivery in Auction Market
When the auction seller fails to deliver in part or full on auction pay-in day, the deal will be closed out at the highest price prevailing in the NSE from the day on which the trade was originally executed till the day of closing out or 20% over the official closing price on the close out day whichever is higher and will be charged to the auction seller unless otherwise specified.
Compulsory Close-out of securities under Corporate Action
In cases of securities having corporate actions and no ‘no-delivery period’ for the corporate action, all cases of short delivery of cum transactions which cannot be auctioned on cum basis or where the cum basis auction pay out is after the book closure / record date, would be compulsory closed out at higher of 10% above the official closing price on the auction day or the highest traded price from first trading day of the settlement till the auction day.
Closing out in the case of non rectification/replacement for bad delivery
Shortages are closed are at the highest price prevailing in the NSE from the day of trading till the day of the closing out or 20% above the official closing price on the auction day, whichever is higher.
Closing out in the case of non rectification/replacement for objection cases
Close out in the case of non rectification / replacement for objection cases will be at 20% above the official closing price on the auction day.
Rectified / Replaced bad deliveries reported as bad delivery (Rebad delivery)
Rectified / replaced shares reported as bad delivery (Rebad delivery) will be closed out at the highest price prevailing in the NSE from the day on which the trade was originally executed till the day of the closing out or 10% above the official closing price on the auction day whichever is higher.
Company objection cases reported as bad delivery
Rectified /replaced company objection reported as bad delivery will be closed out at 10% above the official closing price on the auction day.
Close out price for deleted security
Security for which trading has been discontinued on the Exchange close out will be the last 26 weeks average trade price on the exchange with a close out mark up of 20%.
Close out price for bonds
In case of failure to give delivery, non rectification/replacement of bad delivery, rectified/replaced bad delivery subsequently reported as re-bad, auction non-delivery, and auction delivery reported as bad delivery, closing out price will be the highest rate prevailing on the Exchange from the first day of the relevant trading period till the day of closing out or 5% over the official closing price on the auction day, whichever is higher for bonds, debentures assigned a credit rating of triple A and above. For the other debentures and the bonds without the triple A credit rating, the close out mark up of 20% will be applicable.
In case of non rectification / replacement of company objection and rectified/replaced company objections reported as bad delivery, closing price will be 5% over the official closing price on the auction day.
Closing Out for LPM Deals
In the case of failure to give delivery close out will be at 20% over the actual trade price. In the case of non rectification/replacement for bad delivery close- out will be at 10% over the actual trade price.
In the case of non rectification/replacement for objection cases close-out will be at 20% above the official closing price in regular market on the auction day.
So . In any of the cases of the short delivery case ; the buyer is ought to be benefitted and the seller is equally ought to be in same loss proportionate as the benefit of the buyer!
From what I understand, there are can be a case where even the short seller can benefit (This is explained in the thread I had linked in my post above). Also, sometimes auctions don’t happen at all in cases of short delivery because internal netting off is done by the exchange at the broker level (Refer to this thread). Moreover, only in the close-out scenario does the buyer benefit, otherwise, if the auction occurs normally, then any difference in auction price and valuation debit is transferred to the Investor Protection Fund instead and buyer gets the securities they had purchased with a delay of a day.