I have gone through the various posts on short selling and auction. i think there is lack of clarity on few points. I will mention them and it will be helpful if you could elaborate it over here to settle it for all. Also elaborate process can be updated on varsity.
Suppose for whatever reasons a client has a short delivery of stock on a particular day. Now EOD two things can happen. At broker level you have a short delivery to exchange or you don’t have a short delivery to exchange as some of your clients have bought the same stock.
- Now for case 1 moving forward on T+1 what is being done by you as a broker if you were net short on previous day. when you say you try to buy shares in open market on t+1 what do you exactly mean by it as you wont get the the delivery of it on same day unless it is being sold by one of your clients. Please walk us through step by step process till the final auction settlement
2)For case 2 if as a broker you didn’t have any obligation to the exchange on day T.How do you settle the process internally. On T+1 how do you transfer the shares to real buyer even if you manage to buy from open market that day as delivery of any new new order might happen next day. Incase you are not able to buy and as you were not short at broker level previous day ,so i assume this wont go through auction markets.Then how do you settle this.
I really want to know full elaborate process as i have suffered through this before and lack of complete knowledge of process still leaves me confused. Also for the above person @d_p was the close out settlement done by exchange or was it done by you as an internal adjustment and his short delivery never made to auction market as you as a broker had no obligation to exchange as at broker level you had not short delivered. if latter is the case then it is really sad as it would have been better for him had his underdelivered position got a chance to be filled at auction market.