When a short sold position that hits Upper Circuit is settled at the Auction on T2, what is the technical term for this settlement note issued by the exchange to the client that records the auctioned price ?
Whenever a client selling stocks, doesn’t deliver for any reason including the reason of not being able to deliver due to the stock hitting the upper circuit, the stock either goes for an auction or gets adjusted internally within the broker.
Internal adjustment:
This happens when one client sells a stock, is unable to deliver it, and at the same time there’s another client of the broker who purchases the same stock. In such an event, the stock doesn’t go through an auction settlement, since there’s no obligation towards the Exchange.
Ideally the broker would have debited the selling client and credited such units to the client who has bought them. Since the broker is no longer able to debit, due to non availability of stocks with the seller, he has to internally adjust such a transaction. Each broker may have his own method to adjust/settle such transactions internally. At Zerodha, we buy such short delivered stocks in our account, transfer the purchase obligation to the client who has short delivered and credit units of stocks to the client who has purchased.
Short delivery at the Exchange
This happens when a client short sells a stock & isn’t able to deliver it and at the same time there are no purchase made by any other clients of the broker. In such a case, the Exchange calls for an auction. The entire process of auction has been explained on this link.
As I’ve said earlier, any act of not delivering stocks after selling them on delivery will result in a short delivery. I can’t think of anny special term for auctions that happen out of not being able to deliver due to stock hitting the upper circuit. Another thing to know is that the Exchange never issues any settlement/contract notes to the client, it’s always a broker who does this.
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Incase, if F&O or Non- F&O Stock which was Short sold in BRACKET ORDER that hits(SL) Upper Circuit, whether this will go to Short Delivery holding for T+2 auction or Sq.off will happen once the SL Trigger hits Upper Circuit or Auto Sq.off done at EOD by Zerodha?
Also, What will happen if Long buy position in BRACKET ORDER which hits lower circuit in F&O Stocks & Non F&O Stocks?
Whether SL Trigger limit order can be placed above Or Below Upper and Lower circuit levels in BO Short or Long Positions respectively in Day Trading purpose in both F&O and Non- F&O Stocks?
F&O stocks don’t have circuits. So this issue won’t happen.
How can a client know either their position will be settled internally or go for auction?