Unregulated entities cannot give advice. There is already a law for that and it is being enforced.
That is what entire Youtube Fin Influencers community is?
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Not everyone. But whoever is doing this will trip and fall over the regulatory line.
@nithin in my short delivery case I got a response from Zerodha that RMS tried to buy shares on T+1 day on my behalf but it hits upper circuit so not able to however the shares was trading till 3:04 pm. Can I expect a detailed information in my case as nobody is responding?
Hmm⌠buying on T+1 day isnât of any use if there is a short delivery.
For example if on T day you shorted something and it hit the upper circuit, you will default on the shares that you have to deliver on T+1 day (Settlement has to happen on T+1). If you default on T+1, you are taken to auction on T+2. Even if you bought on T+1, it is of no use as you would still default on T+1 day as what you buy on T+1 reaches your demat only on T+2.
Can you share your ticket number, will get @ShubhS9 to check on the response. If you default to deliver on T+1 due to a stock is stuck in upper circuit and you are short, you will be forced to go to auction, no other way around it. Unless of course, you can transfer shares from somewhere outside on T+1 before settlement.
Check this
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@nithin thank you sir for your response, i have already shared details previously regarding this with @ShubhS9 ( #20231213886330).
This is the response from Zerodha " On the said day, the client placed multiple orders in the disputed scrip and held a short position for 102001 quantities at an average price of Rs.83.34 The client did try to exit the position, but the stock had breached the upper circuit limit. The auto square-off order was placed from our end at 3:20 PM and remained open in the system till the market closed and was eventually cancelled by the exchange. Order book was produced in our previous response. On 12th of December 2023, our RMS team did tried to buy the shares from the market, however the said script hit the upper circuit twice on 12th of December 2023. The RMS ream was not able to purchase the share. Hence, the settlement of these happens based on the close-out process laid down by the exchange which is the highest price of the stock from the date of selling to the auction day or 20% above the closing price on the auction day. As such 102001 shares of IREDA were settled at an average price of Rs.122.22."
Sir shares of IREDA was trading till 3:04 and if RMS bought it on highest price of 102 my losses could be half (~20 Lakh).
I guess what our team was referring to the auction market which is held on T+1 and not the normal market. On the auction market which is open between 2pm to 2.30 pm whatever could have been bought was bought and the rest was closed out. Will get someone to reach out and have a word with you and explain this better. It is unfortunate that this happened, but this is the risk of taking large short intraday positions in equity, especially non F&O stock which can hit circuit.
We had shared this post sometime back on Auction markets
Yeah. No one was willing to sell on auction market as the stock I guess had gone up even in the normal market on the T+1 day.
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@nithin sir, Share will go for auction on T+2 i.e 13 Dec and only Exchange can do that as per my understanding. Zerodha RMS can place order on my behalf and close my position on 12 dec or allow me to close myself which can help me to minimize my losses but nothing happens even after i called on 12 dec morning. If there was any possibility which can save me, Zerodha should help me with, i would appreciate that.
Was it mandatory to buy all my short position share in auction market? canât it be considered as internal shortage if me as a seller and someone who buy was the client of Zerodha? Also can you please confirm that same settlement has been done for all other users who has Short sell IREDA on 11 dec?
Shares short sold on 12th, will need to be delivered on 13th morning. So your âbuyingâ on 13th would have no affect since the short delivery would have happened for your transaction of 12th. To cover, we attempted to buy shares, but werenât able to buy the entire short quantity, thereby resulting in a close out.
@VenuMadhav i short sold on 11 dec 2023, Your RMS tried buying on 12 Dec and I got a Contract note on 13 dec. Can you please share the Order id where RMS tried to buy shares on my behalf on 12 dec in Auction/Open Market?
- Also i am not able to download Auction contract note from portal : ref link : How to track the previous auction market trades?
- Can you provide auction script qty list for 11,12 & 13 Dec 2023 ref: Auction market- List of stocks available for trade today - Google Drive
- Also can you respond to other queries as well in previous thread.
As per this article auction happens on T+1 and only Exchange can be buyer how Zerodha RMS is trying to buy from auction market?
We attempted buying shares in the regular market, not auction. In the auction market, as the article says, one can only fill the sell side. Pending orders get canceled at eod, Iâm not sure if thereâs a way to verify orders. Will have someone from our team reach out an help you with this.
@nithin @VenuMadhav if it is in regular market then i am expecting to get my position settled as shares were trading.
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 donât 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 didnât 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.
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Ok, let me clarify. Iâm attempting to give you a summary of what happens as a practice in general and then will answer the specific case.
As youâve rightly said, there are 2 forms of shortages - internal shortage & exchange level broker shortage. A shortage is when a client sells stocks but doesnât deliver.
You must know that the settlement of stocks happens at a broker level on a net basis. Positions are net off at client level, then at TM level and then the net deliverable/receivable obligation is calculated. If client A sells 100 shares of RIL (and does not deliver) and client B of the same broker buys 100 shares of RIL, then the net deliverable obligation of the broker to the CC is 0. This is a case of internal shortage since thereâs no deliverable obligation on part of the broker. In a usual case of internal shortage, the policy is to take part in a facility offered by the Stock exchange called âVoluntary auctionâ. We upload a file to the exchange on T+1 (settlement date) and ask them to buy securities in the auction market. In the auction market, the exchange is filling the buy side, whereas the sell side can be filled by investors including Zerodha clients. If the exchange is able to procure shares in the auction market, then on T+2, the shares are credited to the broker and the auction settlement amount is debited from the brokerâs account. The broker will then proceed with crediting securities to the investor who bought them and did not get delivery (credit to investor on T+2), and will debit the short delivering client with the auction settlement amount.
If the exchange is not able to buy securities in the auction market, then the exchange notifies broker of the same. The broker is required to handle it internally (since itâs a case of internal auction) and the usual process is to close out the trade where you give credit to the buying client (instead of securities) & debit the short selling client. We follow the exchangeâs policy of closing out trades which is: âClose out shall be at the highest price prevailing across the Exchanges from the day of trading till the auction day or 20% above the settlement price on the auction day, whichever is higher.â
If itâs not a case of internal shortage, the Exchange just carries out an auction on T+1, settlement of which is done on T+2. Same policy applies as stated above ^ except that the Exchange closes out the trades and debits the obligation sum themselves which the broker then passes on to the short delivering client.
In the case of IREDA, we did not take part in the voluntary auction. This is because, the stock was hitting upper circuits continuously and we were not hopeful of being able to obtain the shares in the voluntary auction (at the time of uploading files to voluntary auction, the stock had hit upper circuit already). Hence, the team decided to buy the securities in the open market, post the purchase obligation to the short delivering client & then deliver the securities to the purchasing clients on T+2. Since we had a large quantity of shortage, we were not able to find a fill for all securities at the desired price and thus had to resort to closing out. Would we have procured shares in the auction market? Itâs anybodyâs guess, but at the moment, we did what we thought was in the best interest of our client. You must note that Zerodha does not stand to gain anything by posting the close out price to the short delivering client, the credit is received by the client who purchased securities and did not get it.
Youâre looking at it from the sellerâs side. Put yourself in the shoes of the buyer. Youâve bought securities on T day, the stock has hit upper circuit (which is good for you as a buyer). On T+1, the seller defaults. On T+1 too, the stock hits upper circuit. As a buyer, youâre to get delivery of your securities, but you donât. Ultimately, if you donât end up getting securities at all, arenât you losing out on the opportunity of being able to sell securities at a price much higher than what your original price was? If the client had plans of holding on to the securities, shouldnât they be compensated to the extent that they can buy securities at increased prices?
Would I be disappointed if I suffered a loss - absolutely, given the sum involved is higher. But thereâs a degree of risk that comes with trading the markets, especially when someoneâs trading in scrips which have circuit limits, in large quantities. We understand the grievance of the investor and have also offered a fair and transparent resolution process.
@VenuMadhav can you please share few more details for further clarification and transparency :
- Total no IREDA shares ZERODHA tried to buy on 12 Dec 2023
- Total no of IREDA shares ZERODHA were able to buy
- TIME/ORDER id
- Did Zerodha bought any Shares of IREDA internally on 11 or 13 Dec too?
âat the time of uploading files to voluntary auction, the stock had hit upper circuit already). Hence, the team decided to buy the securities in the open marketâ
- Not sure what time you are referring but the IREDA script HITS upper circuit twice ~9:45 am (for only 1 minute ) & 3:04pm (till closing)
I
Iâm sorry, I cannot give account specific details on a public forum. Please raise a support ticket and someone from the team will respond.