You will lose around Rs 230 per share.

This is just a guess.

Your final loss will depend on the price of the stock on auction day (12th August).

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I sold page ind 60 shares @ 2332 on 10th Aug, 2011. But I got credit in my account, on the same day after consolidation. What's that I didn't understand, are they going to withdrew that amount or what?

No.

This amount will not be withdrawn.

First, your broker will make a "valuation debit" from your account.

This may be as high as 150% of the "Valuation Price".

The shares that you sold short, will be bought in an auction and the bill will be sent to you.

After the auction is complete, the valuation debit will be reversed and the auction amount will be debited from your account.

Thus, 3 more entries will be made in your account:

1. Valuation debit.
2. Valuation debit reversal.
3. Final auction debit.

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Hello

I want to understand the issues in short delivery.

I have sold 25 shares of Grasim in 2142 rs and could not buy them.

Now what could be the problem.

Gaurav

Depending on whether the shortage is at broker level or exchange level, the broker or the exchange will buy the shares in an auction and you will have to pay for these shares.

The auction will be held on T+2 day.

When did you sell these shares?

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Today I have sold 250 Nos. of shares of Jaypee Infratech Ltd.in NSE but could not be able to buy the shares (i.e square off my positions) on the same day.

What are the consequences of it?
When this problem be settled?
What are the hidden charges and Penalty- behind it?
What will be the Maximum LOSS for it?
Will there any legal action /other penalty be taken for this transaction under any law (like SEBI,NSE,IPC Laws)?
Will I be debarred in future from trading in stock market?
Please let me know. I am really worried.
Thanks in advance,

Risab.

You will find most of your answers if you read the thread.

The shortage will be either at broker level (internal) or at exchange level.

If it is an internal shortage, the consequences will depend on your broker's policies.

Exchange level shortages are settled by auctions.

Two trading days after the trade date (T+2 day), the exchange will buy the shares from the auction market and you will have to pay for these shares.

Maximum loss can't be calculated. It will depends on the price of the stock two days from now.

Other than the financial loss, you need not worry about anything else.

Short deliveries happen every day at the exchanges. Hundreds of traders give short delivery every week.

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I have done short selling of 150 Jaypee Infratech in margin trading and could not squared off due to upper circuit. What strategy I should opt to minimize my losses? Whether I will be able to buy the same quantity tomorrow so that I could get some gain from that shares?

That's a very difficult question to answer.

The stock is already volatile. Making short-term predictions about stocks isn't easy, especially about volatile stocks.

The stock can go anywhere after you buy - up or down.

It may also happen that the stock's market price falls after you buy tomorrow, but your auction price turns out to be much higher than the market price.

I have no idea where the stock will be on auction day (Wednesday), but if I were in your place, I won't trade this stock now.

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Thank you for your guidance. I got the point one can not predict the price of Jaypee Infra on Wednesday.

Thank you for your guidance sir.

Now I want to know how the auction price will be determined in NSE and when the auction will be held? (I made the short delivery on yesterday, i.e on 17.10.2011)?

Could you please tell me the procedure of auction in NSE?

When I will be able to know the auction price and the loss thereafter?

Please let me know.

Thanks,

Risab.

For a trade done on 17th, auction will be held on 19th and settlement will be done on 20th.

If your broker informs you, you will know the auction details by 19th night.

Otherwise, you can check your ledger on 21st morning. The auction entry will be done in it by 20th night.

Auction market is a separate market. The price of the auction is determined from the offers made by the sellers. The lowest sell offers are selected.

The prices offered by the sellers have to be within the permissible price band (cash market price band) for the day.

The buyers have to buy the shares, no matter how high the offered price is.

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134297 shares of Jaypee Infratech will have to be bought in auction today.

Whenever a stock hits upper circuit, the auction quantity is always high (relative to other days).

http://www.nseindia.com/content/nsccl/AUB.csv

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What can be the maximum penalty for the short delivery?

You mean what could be the maximum auction or close-out price?

It depends on the stock.

For stocks in the derivatives segment, theoretically, the auction price can be anything. If the stock goes up 1000% in one day, the auction price would also be approximately 1000% above the selling price.

For other stocks, the maximum auction price depends on how high the stock can go between the day on which the shares were sold and the auction day.

For internal shortages, the maximum price depends on the policies of the broker.

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Hi Alchemist, I have short sell Voltas @ 105.77 on 15022012. But I could not squareoff it today due to some problem. The Stock has been closed @ 119.45.

Please let me know the worst scenario ? As per previous conversation will it end up with 20 % on 119.45 or 105.77 ?

The auction will be held on T+2 day (17th).

The maximum auction price will be 20% above today's (16th) closing price or the highest price touched between trade day and auction day.

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Dear Sir,

I have done 5 transaction of 100 shares each (scrip is jet airways) today i.e. on February 21, 2012 on NSE. First, i short sold 100 shares and bought 100 shares, thereby squaring off the first transaction. I again sold 100 shares and bought 100 shares, thereby squaring off the second transaction. I made a small profit on these first two transactions

I then short sold 300 shares at an average price of 352 odd, but could not square off by the end of the day. The closing share price today i.e. February 21, 2012 is 352.80.

In this scenario I wanted to understand

1. What is it that will happen to these 300 shares that I have short sold.
2. When will they get auctioned and
3. How would the price be determined?

I have read the post and this is what I understand, please correct me if i am wrong:

1. These 300 shares will be auctioned on T+2 basis i.e. they will get auctioned on February 23, 2012 and will be settled on February 24, 2012. Even if I buy the shares tomorrow (i.e. on February 22, 2012) at a price which is lower/higher than today's closing price of 352.80, the auction will not get affected and the auction will most definitely happen on February 23, 2012.

2. The auction may depend on whether it will be at broker level or at the exchange level. My broker is indiabulls and the exchange was NSE. so it may happen either internally at Indiabulls or on the exchange.

3. The worst case scenario in terms of price, could be that the 300 shares would be bought at the highest price of the day on February 23, 2012 (i.e. the T+2 day).

Please let me know if my understanding is right.

Regards.
Jaideep

Only 100 shares will be auctioned. You squared-off 200 shares and so you don't have to deliver them.

Auction will be held on T+2 day (23rd) and settlement of the auction will be on T+3 day (24th).

If it turns out to be an internal shortage, then the auction price (or close-out price) will depend on Indiabulls' policies for internal shortages.

In case the shortage is an exchange level, the auction price will be determined by the sellers in the auction market.

If the shares can't be bought in the auction, the position will be closed out.

http://www.nseindia.com/content/nscc...qshortages.htm

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He sold 300 again.
Anyway 100 or 300, it doesn't matter. The logic is the same.

Dear Sir,

I believe that the scrip is fairly liquid, so there shouldn't be any problem on the auction front.

Generally, the auction does not happen at the Indiabulls level from what I have heard, so I guess the auction will happen by the exchange.

Now, if the auction happens by the exchange what would be price, would this in the worse case scenario be the highest price on 23rd (t+2) or will this be highest price on 23rd or 20% above closing price of 23rd whichever is higher?

Please let me know, because 20% higher to any closing on 23rd, could mean very deep losses.

Also, if you could shed some light on what would be the penalty that would be levied by the exchange.

Though, it is different thing that my squaring off did not happen because of some internet connection issues, I doubt the exchange would take that into account .

regards,
jaideep

Also, I believe 300 shares will be auctioned as at the end of the day that was the quantity which was short sold by me.

The auction will happen on 23rd. So the highest possible price in the auction will be 20% above the closing price of 22nd.

In case the shares the not bought in the auction, the close-out price will be:

http://www.nseindia.com/content/nscc...eqcloseout.htm

Your first statement was that you traded 100 shares five times, so I thought you sold 100 shares the third time too.

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Sir,

Thank you for painstakingly answering all my queries, i really appreciate it. Could you please let me know if there is any penalty that would be charged by the exchange, in addition to the above mentioned mechanism.

Regards,
Jaideep

There is a penalty, but it's a very small amount.

I am not sure how much it is. I will have to check NSE's site.

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Sir,

One other thing I wanted your opinion on, in a best case scenario, if the share price falls (like in the present case jet airways is quoting at 328 odd while I type this, I short sold it at around 352), is the profit shared with the client (assuming that a successful auction takes place) or does the money go to investor protection fund, I happen to read somewhere that the money goes to the investor protection fund.

Regards,
Jaideep

Investors are not allowed to make profits from short deliveries.

BSE - FAQ's

The above is for exchange level shortages.

I am not sure what other brokers do for internal shortages, but Kotak Securities follows the above principle for internal shortages.

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Hi Alchemist, I have short sell United Spirits 50 @ 629 on 02042012. But I could not square off it today due to some problem. The stock has closed @ 637.35.

Please let me know the worst scenario?

United Spirits is in the derivatives segment and thus the potential of loss is unlimited.

There are no circuit limits in the derivatives segment. That means United Spirits can rise to any level in a single day.

The auction will be held tomorrow and the auction price will be higher than the market price of the stock.

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