Pay-Out Pay-In Shortage

PrashantS · #1 22nd September 2010, 11:55 AM

I am a small trader, started trading about two months back, on an investment of Rs. 80,000. I'm still reading technical analysis books and at present follow the tips on CNBC.

On 15th September (Wednesday), I bought 50 shares of a company at 139.60. On the 16th, I sold them off at 141.25.

On the 17th (Friday), I received two emails from my broker, the first saying there was a pay-out shortage and there would be an auction on T + 4 day. The second email said there was a pay-in shortage and that I should transfer the shares to my account by 10.00 AM on 20th September (Monday), or else there would be an auction.

I've received the auction statement on the 21st (Tuesday), given below. The price of the share these past few days has been:

15th:
Open: 140.25
H / L: 142.00 / 138.35
Close: 139.50
Avg : 139.62

16th:
Open: 139.40
H / L: 141.85 / 137.70
Close: 138.80
Avg : 140.07

17th:
Open: 139.05
H / L: 141.25 / 138.60
Close: 140.70
Avg : 140.13

20th:
Open: 141.25
H / L: 141.30 / 139.35
Close: 140.75
Avg : 140.13

21st:
Open: 142.00
H / L: 143.00 / 137.60
Close: 138.70
Avg : NA

The auction statement shows that the shares were auctioned at the rate of 149.10 per share. It also says "Your above mentioned purchase transaction has been squared off at the rate of Rs.149.10".

So how many auctions take place - one for the person not delivering shares to me, and one for me not delivering them to someone else? Or is there only one auction? And have I made a profit or a loss?

And shouldn't I be informed of a pay-out shortage on the same day so I don't sell the shares the next day?

Please help as I am totally confused.

Alchemist · #2 22nd September 2010, 05:46 PM

What is the date mentioned in the auction statement?

There should have been two auctions and you should have got statements for both of them.

When you buy shares and then sell them on T+1 day, there is always a risk of getting and giving short delivery.

Quote:

What will happen in case the delivery for shares sold by the customer is not received from the exchange? BTST® is a facility whereby the customers are being allowed to sell their shares against their receivable position in the same shares from the same Exchange. However, in case there is a short delivery from the Exchange for the earlier buy transaction, then the BTST® customers will also be giving short delivery for their sell transaction. The Exchange would either give delivery of shares bought earlier through market auction or shall closeout the buy transactions as per the Exchange Regulations. However, this would not help the customer in meeting his sale delivery obligations already committed by him as even if he receives the shares bought earlier through auction settlement, by that time the securities pay-in date for his sell transaction would be over. In such case, the customer will have to face auction proceedings against his sale transaction and will have to bear the auction losses, auction penalties and any other incidental charges etc.

Source: https://secure.icicidirect.com/tradi...y/btst_faq.asp

Quote:

Originally Posted by PrashantS

And shouldn't I be informed of a pay-out shortage on the same day so I don't sell the shares the next day?

How is that possible?

The settlement happens on T+2 day.

How can the exchange predict on T+1 day which shares won't be delivered.

kris_mar · #3 22nd September 2010, 06:44 PM

To add to what Alchemist has added.

Check your contract note for a settlement Number and you can check the NSE schedule here to get an idea of the timeline.

PrashantS · #4 22nd September 2010, 07:30 PM

Okay, I got another auction settlement statement today (22nd, Wednesday). It says the shares were sold at 140.30, which means Rs. 4209.00 + Penalty for shortage @ 1% = 42.09 + Securities Trans. Tax = 5.00. So the total comes to Rs. 4251.00, deducted from my account. This is less than the money that was credited to me, which means I have made a profit of Rs. 222?

Alchemist · #5 22nd September 2010, 08:05 PM

Quote:

Originally Posted by PrashantS

Okay, I got another auction settlement statement today (22nd, Wednesday). It says the shares were sold at 140.30, which means Rs. 4209.00 + Penalty for shortage @ 1% = 42.09 + Securities Trans. Tax = 5.00. So the total comes to Rs. 4251.00, deducted from my account. This is less than the money that was credited to me, which means I have made a profit of Rs. 222?

So the auction rate (corresponding to your sold shares) is less than the rate at which you sold the shares?

That is strange.

According to BSE's site, those giving short delivery aren't allowed to make a profit from it.

Quote:

In such case, if the auction price/close-out price is higher than the standard price of the settlement in which the transaction was done, the difference is recovered from the seller who has failed to deliver the scrips. However, in case, auction/ close-out price is lower than standard price, the difference is not given to the seller but is credited to the Investors Protection Fund.

PrashantS · #6 22nd September 2010, 08:18 PM

Maybe I'm making a mistake. I'll check again.

Trader73 · #7 12th December 2010, 07:06 AM

You have not posted auction details. What happened?

PrashantS · #8 13th December 2010, 06:24 PM

I've already forgotten everything now. Its almost two months.

Trader73 · #9 14th December 2010, 07:15 AM

Actually I had to face this auction process two times and both times loss. But you said about profit through auction, that's why interested to know. Alchemist also pointed out earlier.

PrashantS · #10 19th December 2010, 06:51 PM

I said about the profit thing a long time back, when I started trading. I didn't even understand properly what an auction was at that time. It was a very small loss, compared to the time I shorted Delta Corp and it hit upper circuit. See the thread "Shorted stock hit upper circuit."

After that time, I've faced two other auctions, because of BTST.