Trading and settelment in stock exchange..docx1

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Trading and settelment in stock exchange..docx1

  1. 1. stockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangesto Trading andckexchangestockexchangestockexcha Settlement inngestockexchangestockexchangestoc stockkexchangestockexchangestockexchan exchangegestockexchangestockexchangestockexchangestockexchangestockexchang Matang Barot 03estockexchangestockexchangestocke Rajvi Dedhia 11 Shantanu Kurup 28xchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangestockexchangest
  2. 2. AcknowledgementMy deepest thanks to Shruti mam for guiding us through this project andfor supporting us through out. Mam’s suggestions and recommendationshave been invaluable for this project. Then I would like to thank myteacher, for guiding me and my friends throughout this project. We hadsome difficulties in doing this task, but she taught us patiently until weknew what to do. Last but not least, my friends who were doing this project with me andsharing our ideas. They were helpful that when we combined and discussedtogether, we had this task done.I would also like to thank the college and Mumbai University for providingme with the opportunity to do this project.
  3. 3. Introduction to TradingTrade is the transfer of ownership of goods and services from one personor entity to another. Trade is sometimes loosely called commerce orfinancial transaction or barter. A network that allows trade is called amarket. The original form of trade was barter, the direct exchange of goodsand services. Later one side of the barter was the metals, precious metals(poles, coins), bill, and paper money. Modern traders instead generallynegotiate through a medium of exchange, such as money. As a result,buying can be separated from selling, or earning.Stock exchange has two elements – Trading and clearing and settlement.There are basically three tasks performed in process of buying andselling of securities. They are- Trading Clearing SettlementTrading basically deals with putting an order and its execution. Clearingdeals with determination of obligations, in terms of funds and securities.Settlement means that the trade will be completed and NSCCL acts as acounter party and takes obligation for the same. It has created a faith in theinvestors that all trades would be settled and in no case any investor willhave to face any problem of insufficient funds and securities.
  4. 4. What Do You Need To Trade In StockExchangeFirst step is to open a DEMAT account with any nationalized bank or thebank you already have account in. All the DEMAT accounts function in asame manner. You should also open a trading account with a reputed stockbroking firm. The stock broking firm you choose can make a hugedifference though. These firms perform extensive research in market andguide their customers to make a secure and intelligent investment.How to Trade in Stock Exchange IndiaFor trading in the Indian stock exchange you need to open a stock exchangeaccount with an NSE/BSE certified stock broker. And to open your stockexchange trading account, you will require the following documents: 1. PAN Card 2. Proof of residence (Address proof) – You can provide any one of the following for this: 3. Identity Proof 4. Two passport sized photographsPlease Note – Following work as address proof and identity proof Driving license Voters ID Passport Photo ration card
  5. 5. Settlement AgenciesThe NSCCL, along with other agencies like clearing members, custodians,clearing banks and depositories settles trades executed on the exchange.The National Securities Clearing Corporation Ltd. (NSCCL), a whollyowned subsidiary of NSE, was incorporated in August 1995. It was set upto bring and sustain confidence in clearing and settlement of securities; topromote and maintain, short and consistent settlement cycles; to providecounter-party risk guarantee, and to operate a tight risk containment system.NSCCL commenced clearing operations in April 1996.NSCCL carries out the clearing and settlement of the trades executed in theEquities and Derivatives segments and operates Subsidiary General Ledger(SGL) for settlement of trades in government securities. It assumes thecounter-party risk of each member and guarantees financial settlement. Italso undertakes settlement of transactions on other stock exchanges like,the Over the Counter Exchange of India.
  6. 6. CustodiansAs the name suggests, the custodians perform the task of keeping thesecurities in a safe manner/custody. A financial institution that has the legalresponsibility for a customers securities. This implies management as wellas safekeeping. They hold the documentary proof of securities, keeping thetitle of the securities intact in the name of the holder.
  7. 7. Clearing BanksClearing banks act as a link between the clearing members and the NSCCLfor settlement of funds, i.e. pay-in and pay-out of funds. Every clearingmember gets an account opened with the clearing bank for this purposeonly. A clearing bank works on the instruction of the clearing member. Aclearing member after defining the obligations in terms of funds informsthe clearing bank about the obligations to be fulfilled. The clearing bankmakes available the funds required on the pay-out day to meet theobligations on time.
  8. 8. DepositoriesA depository is an organization created under Companies Act 1956 for thepurpose of facilitating electronic transfer of securities in a dematerializedenvironment/form. The client/investors do not open an account with thedepository. Instead the job is performed by the agents of depositories inIndia, namely NSDL & CDSL.Depository is an institution or a kind of organization which holds securitieswith it, in which trading is done among shares, debentures, mutual funds,derivatives, F&O and commodities. The intermediatories perform theiractions in variety of securities at Depository on the behalf of their clients.These intermediatories are known as Depositories Participants.Fundamentally, there are two sorts of depositories in India. One is theNational Securities Depository Limited (NSDL) and the other is the CentralDepository Service (India) Limited (CDSL).
  9. 9. OrdersAn order in a market such as a stock market, bond market, commodity market or financial derivativemarket is an instruction from customers to brokers to buy or sell on the exchange. These instructionscan be simple or complicated. There are some standard instructions for such orders.Market orderA market order is a buy or sell order to be executed immediately at current market prices. As longas there are willing sellers and buyers, market orders are filled. Market orders are therefore usedwhen certainty of execution is a priority over price of execution.A market order is the simplest of the order types. This order type does not allow any control over theprice received. The order is filled at the best price available at the relevant time. In fast-movingmarkets, the price paid or received may be quite different from the last price quoted before the orderwas entered.A market order may be split across multiple participants on the other side of the transaction, resultingin different prices for some of the shares.Limit orderA limit order is an order to buy a security at not more, or sell at not less, than a specific price. Thisgives the trader control over the price at which the trade is executed; however, the order may neverbe executed ("filled"). Limit orders are used when the trader wishes to control price rather thancertainty of execution.A buy limit order can only be executed at the limit price or lower. For example, if an investor wantsto buy a stock, but doesnt want to pay more than $20 for it, the investor can place a limit order tobuy the stock at $20 "or better". By entering a limit order rather than a market order, the investor willnot buy the stock at a higher price, but, may get fewer shares than he wants or not get the stock at all.A sell limit order is analogous; it can only be executed at the limit price or higher.Both buy and sell orders can be additionally constrained. Two of the most common additionalconstraints are Fill or Kill (FOK) and all or None (AON). FOK orders are either filled completely onthe first attempt or canceled outright, while AON orders stipulate that the order must be filled withthe entire number of shares specified, or not filled at all. If it is not filled, it is still held on the orderbook for later execution.Time in forceA day order or good for day order (GFD) (the most common) is a market or limit order that is inforce from the time the order is submitted to the end of the days trading session. For equity markets,the closing time is defined by the exchange. For the foreign exchange market, this is until 5pmEST/EDT for all currencies.
  10. 10. A good-till-cancelled (GTC) order requires a specific cancelling order. It can persist indefinitely(although brokers may set some limits, for example, 90 days).An immediate-or-cancel order (IOC) will be immediately executed or cancelled by the exchange.Unlike a fill-or-kill order, IOC orders allow for partial fills.Fill-or-kill orders(FOK) are usually limit orders that must be executed or cancelled immediately. Unlike IOC orders,FOK orders require the full quantity to be executed.Most markets have single-price auctions at the beginning ("open") and the end ("close") of regulartrading. An order may be specified on the close or on the open, and then it is entered in an auctionbut has no effect otherwise. There is often some deadline; for example, orders must be in 20 minutesbefore the auction. They are single-price because all orders, if they transact at all, transact at thesame price, the open price and the close price respectively.Combined with price instructions, this gives market on close (MOC), market on open (MOO),limit on close (LOC), and limit on open (LOO). For example, a market-on-open order is guaranteedto get the open price, whatever that may be. A buy limit-on-open order is filled if the open price islower, not filled if the open price is higher, and may or may not be filled if the open price is thesame.Conditional ordersA conditional order is any order other than a limit order which is executed only when a specificcondition is satisfied.Stop ordersA stop order (also stop loss order) is an order to buy (or sell) a security once the price of thesecurity has climbed above (or dropped below) a specified stop price. (Note that both bid and askprices can trigger a stop order.) When the specified stop price is reached, the stop order is entered asa market order (no limit). This means the trade will definitely be executed, but not necessarily at ornear the stop price, particularly when the order is placed into a fast-moving market, or if there isinsufficient liquidity available relative to the size of the order.The use of stop orders is much more frequent for stocks and futures that trade on an exchange thanthose that trade in the over-the-counter (OTC) market.[Broker Dependent] Charles Schwab definition: Stop orders and stop-limit orders are very similar,the primary difference being what happens once the stop price is triggered. A standard sell-stop orderis triggered when the bid price is equal to or less than the stop price specified or when an executionoccurs at the stop price.[Editorial point] Key point is "bid/ask" which are cues and do not represent the stock’s value. Thebroker above moves the stop order to the market queue based on a BID queue not on a completedtransaction. For instance, on a stock XYZ closing at $20 the day before with a stop-loss order at $19and which trades on low volume, the bid/ask at the open can be skewed in that at the open all the
  11. 11. market interest is not represented. The bid queue shows $18.5, the market opens, being the highestbid the broker triggers the stop-loss and moves the order to the market, for which there has not evenbeen a trade, an agreed value. The stock trades for $20.50, never even trading at or below the stop-loss order. Brokers who use the BID queue as a trigger violate the stop-loss definition as per the SECwho defines it as a trade. The impetus for the broker definition is commissions.A sell stop order is an instruction to sell at the best available price after the price goes below thestop price. A sell stop price is always below the current market price. For example, if an investorholds a stock currently valued at $50 and is worried that the value may drop, he/she can place a sellstop order at $40. If the share price drops to $40, the broker sells the stock at the next available price.This can limit the investors losses (if the stop price is at or above the purchase price) or lock in someof the investors profits.A buy stop order is typically used to limit a loss (or to protect an existing profit) on a short sale. Abuy stop price is always above the current market price. For example, if an investor sells a stockshort—hoping for the stock price to go down so they can return the borrowed shares at a lower price(Covering)—the investor may use a buy stop order to protect against losses if the price goes too high.It can also be used to advantage in a declining market when you want to enter a long position close tothe bottom after turn-around.A stop limit order combines the features of a stop order and a limit order. Once the stop price isreached, the stop-limit order becomes a limit order to buy (or to sell) at no more (or less) thananother, pre-specified limit price. As with all limit orders, a stop-limit order doesnt get filled if thesecuritys price never reaches the specified limit price.A trailing stop order is entered with a stop parameter that creates a moving or trailing activationprice, hence the name. This parameter is entered as a percentage change or actual specific amount ofrise (or fall) in the security price. Trailing stop sell orders are used to maximize and protect profit asa stocks price rises and limit losses when its price falls. Trailing stop buy orders are used tomaximize profit when a stocks price is falling and limit losses when it is rising.For example, a trader has bought stock ABC at $10.00 and immediately places a trailing stop sellorder to sell ABC with a $1.00 trailing stop. This sets the stop price to $9.00. After placing the order,ABC doesnt exceed $10.00 and falls to a low of $9.01. The trailing stop order is not executedbecause ABC has not fallen $1.00 from $10.00. Later, the stock rises to a high of $15.00 whichresets the stop price to $14.00. It then falls to $14.00 ($1.00 from its high of $15.00) and the trailingstop sell order is entered as a market order.A trailing stop limit order is similar to a trailing stop order. Instead of selling at market price whentriggered, the order becomes a limit order.A trailing stop trailing limit order is the most flexible possible order.
  12. 12. TimingTrading on the BOLT System is conducted from Monday to Fridaybetween 9:15 a.m. and 3:30 p.m. normally. Refer Notice No.20101014-8 for call auction.
  13. 13. GroupsThe scripts traded on BSE have been classified into various groups.BSE has, for the guidance and benefit of the investors, classified thescripts in the Equity Segment into A, B, T and Z groups oncertain qualitative and quantitative parameters. Criteria for "A"Group CompaniesThe "F" Group represents the Fixed Income Securities.The "T" Group represents scripts which are settled on a trade-to-trade basis as a surveillance measure.Trading in Government Securities by the retail investors is doneunder the "G" group.The Z group was introduced by BSE in July 1999 and includescompanies which have failed to comply with its listing requirementsand/or have failed to resolve investor complaints and/or have notmade the required arrangements with both the depositories, viz.,Central Depository Services (I) Ltd. (CDSL) and National SecuritiesDepository Ltd. (NSDL) for dematerialization of their securities.BSE also provides a facility to the market participants for on-linetrading of odd-lot securities in physical form in A, B, T and Zgroups and in rights renunciations in all groups of scripts in theEquity Segment.With effect from December 31, 2001, trading in all securities listedin the Equity segment takes place in one market segment, viz.,Compulsory Rolling Settlement Segment (CRS).The scripts of companies which are in demat can be traded in marketlot of 1. However, the securities of companies which are still in thephysical form are traded in the market lot of generally either 50 or
  14. 14. 100. Investors having quantities of securities less than the market lotare required to sell them as "Odd Lots". This facility offers an exitroute to investors to dispose of their odd lots of securities, and alsoprovides them an opportunity to consolidate their securities intomarket lots.This facility of selling physical shares in compulsory demat scripts iscalled an Exit Route Scheme. This facility can also be used by smallinvestors for selling up to 500 shares in physical form in respect ofscripts of companies where trades are required to be compulsorilysettled by all investors in demat mode.
  15. 15. Listed SecuritiesThe securities of companies, which have signed the ListingAgreement with BSE, are traded as "Listed Securities". Almost allscripts traded in the Equity segment fall in this category.
  16. 16. Permitted SecuritiesTo facilitate the market participants to trade in securities of suchcompanies, which are actively traded at other stock exchanges butare not listed on BSE, trading in such securities is facilitated as "Permitted Securities" provided they meet the relevant normsspecified by BSE
  17. 17. Tick Size:Tick size is the minimum difference in rates between two orders onthe same side i.e., buys or sells, entered in the system for particularscrip. Trading in scripts listed on BSE is done with the tick size of 5paisa.However, in order to increase the liquidity and enable the marketparticipants to put orders at finer rates, BSE has reduced the tick sizefrom 5 paisa to 1 paisa in case of units of mutual funds, securitiestraded in "F" group and equity shares having closing price up to Rs.15 on the last trading day of the calendar month. Accordingly, thetick size in various scripts quoting up to Rs.15 is revised to 1 paisaon the first trading day of month. The tick size so revised on the firsttrading day of month remains unchanged during the month even ifthe price of scripts undergoes a change.
  18. 18. Computation of Closing Price ofScriptsThe closing price of scripts is computed by BSE on the basis ofweighted average price of all trades executed during the last 30minutes of a continuous trading session. However, if there is no traderecorded during the last 30 minutes, then the last traded price of scripin the continuous trading session is taken as the official closing price.
  19. 19. SettlementCompulsory Rolling SettlementAll transactions in all groups of securities in the Equity segment andFixed Income securities listed on BSE are required to be settled onT+2 basis (w.e.f. from April 1, 2003). The settlement calendar,which indicates the dates of the various settlement related activities,is drawn by BSE in advance and is circulated among the marketparticipants.Under rolling settlements, the trades done on a particular day aresettled after a given number of business days. A T+2 settlement cyclemeans that the final settlement of transactions done on T, i.e., tradeday by exchange of monies and securities between the buyers andsellers respectively takes place on second business day (excludingSaturdays, Sundays, bank and Exchange trading holidays) after thetrade day.The transactions in securities of companies which have madearrangements for dematerialization of their securities are settled onlyin demat mode on T+2 on net basis, i.e., buy and sell positions of amember-broker in the same scrip are netted and the net quantity andvalue is required to be settled. However, transactions in securities ofcompanies, which are in "Z" group or have been placed under "trade-to-trade" by BSE as a surveillance measure ("T" group) , are settledonly on a gross basis and the facility of netting of buy and selltransactions in such scripts is not available.The transactions in F group securities representing "Fixed IncomeSecurities" and " G" group representing Government Securities forretail investors are also settled at BSE on T+2 basis.In case of Rolling Settlements, pay-in and pay-out of both funds andsecurities is completed on the same day.
  20. 20. Members are required to make payment for securities sold and/ ordeliver securities purchased to their clients within one working day(excluding Saturday, Sunday, bank & BSE trading holidays) after thepay-out of the funds and securities for the concerned settlement iscompleted by BSE. This is the timeframe permitted to the Membersto settle their funds/ securities obligations with their clients as per theByelaws of BSE.The following table summarizes the steps in the trading andsettlement cycle for scripts under CRS : DAY ACTIVITY T o Trading on BOLT and daily downloading of statements showing details of transactions and margins at the end of each trading day. o Downloading of provisional securities and funds obligation statements by member-brokers. o 6A/7A* entry by the member-brokers/ confirmation by the custodians. T+1 o Confirmation of 6A/7A data by the Custodians upto 1:00 p.m. Downloading of final
  21. 21. securities and funds obligation statements by members T+2 o Pay-in of funds and securities by 11:00 a.m. and pay-out of funds and securities by 1:30 p.m. The member-brokers are required to submit the pay- in instructions for funds and securities to banks and depositories respectively by 10:40 a.m. T+2 o Auction on BOLT at 2.00 p.m. T+3 o Auction pay-in and pay- out of funds and securities by 09:30 a.m. and 10:15 a.m. respectively.The pay-in and payout of funds and securities takes places on thesecond business day (i.e., excluding Saturday, Sundays and bank andBSE trading holidays) of the day of the execution of the trade.The settlement of the trades (money and securities) done by aMember on his own account or on behalf of his individual, corporateor institutional clients may be either through the Member himself orthrough a SEBI registered custodian appointed by him/client. In casethe delivery/payment in respect of a transaction executed by aMember is to be given or taken by a registered custodian, the latter
  22. 22. has to confirm the trade done by a Member on the BOLT Systemthrough 6A-7A entries. For this purpose, the custodians have beengiven connectivity to the BOLT System and have also been admittedas clearing member of the Clearing House. In case a registeredcustodian does not confirm a transaction done by a Member withinthe time permitted, the liability for pay-in of funds or securities inrespect of the same devolves on the concerned Member.The following statements can be downloaded by the Members intheir back offices on a daily basis. h. Statements giving details of the daily transactions entered into by the Member. i. Statements giving details of margins payable by the Member in respect of the trades executed by him. j. Statements of securities and fund obligation. k. Delivery/Receive orders for delivery /receipt of securities.BSE generates Delivery and Receive Orders for transactions done bythe Members in A, B1, B2 and F and G group scripts after nettingpurchase and sale transactions in each scrip whereas Delivery andReceive Orders for "T", "C" & "Z" group scripts and scripts whichare traded on BSE on "trade-to-trade" basis are generated on a grossbasis, i.e., without netting of purchase and sell transactions in a scrip.However, the funds obligations for the Members are netted fortransactions across all groups of securities.The Delivery Order/Receive Order provides information like thescrip and quantity of securities to be delivered/received by theMembers through the Clearing House. The Money Statementprovides scrip wise/item wise details of payments/receipts of moniesby the Members in the settlement. The Delivery/Receive Orders andMoney Statement can be downloaded by the Members in their backoffice
  23. 23. Pay-in and Pay-out for A, B, T, C,"F", "G" & Z Group of SecuritiesThe trades done on BOLT by the Members in all securities in CRSare now settled on BSE by payment of monies and delivery ofsecurities on T+2 basis. All deliveries of securities are required to berouted through the Clearing House,The Pay-in /Pay-out of funds based on the money statement and thatof securities based on Delivery Order/ Receive Order issued by BSEare settled on T+2 day.
  24. 24. Demat pay-in:The Members can effect pay-in of demat securities to the ClearingHouse through either of the Depositories i.e. the National SecuritiesDepository Ltd. (NSDL) or Central Depository Services (I) Ltd.(CDSL). The Members are required to give instructions to theirrespective Depository Participants (DPs) specifying details such assettlement no., effective pay-in date, quantity, etc.Members may also affect pay-in directly from the clients beneficiaryaccounts through CDSL. For this, the clients are required to mentionthe settlement details and clearing member ID through whom theyhave sold the securities. Thus, in such cases the Clearing Membersare not required to give any delivery instructions from their accounts.In case a Member fails to deliver the securities, the value of sharesdelivered short is recovered from him at the standard/closing rate ofthe scripts on the trading day.
  25. 25. Auto delivery facility:Instead of issuing delivery instructions for their securities deliveryobligations in demat mode in various scripts in a settlement /auction,a facility has been made available to the Members of automaticallygenerating delivery instructions on their behalf from their CM Poolaccounts maintained with NSDL and CM Principal Accountsmaintained with CDSL. This auto delivery facility is available forCRS (Normal & Auction) and for trade-to-trade settlements. Thisfacility is, however, not available for delivery of non-pari passushares and shares having multiple ISINs. Members wishing to availof this facility have to submit an authority letter to the ClearingHouse. This auto delivery facility is currently available for ClearingMember (CM) Pool accounts and Principal accounts maintained bythe Members with the respective depositories.
  26. 26. Pay-in of Securities in Physical FormIn case of delivery of securities in physical form, the Members arerequired to deliver the securities to the Clearing House in specialclosed pouches along with the relevant details like distinctivenumbers, scrip code, quantity, etc., on a floppy. The data submittedby the Members on floppies is matched against the master file dataon the Clearing House. If there is no discrepancy, the securities areaccepted.
  27. 27. Funds Pay-inThe bank accounts of Members maintained with the clearing banks,viz., Axis Bank Ltd.,Bank of India, Bank of Baroda, Canara Bank,Citi Bank, Corporation Bank, Dhanalaxmi Bank, HDFC BankLtd., Hongkong & Shanghai Banking Corporation Ltd., ICICI BankLtd, Indusind Bank Ltd., IDBI Bank, Kotak Mahindra Bank, OrientalBank of Commerce., Punjab National Bank, State Bank ofIndia, Standard Chartered Bank, Union Bank of India, Yes Bank aredirectly debited through computerized posting for their fundssettlement obligations.In case of Members whose funds pay-in obligations are not cleared atthe scheduled time, action such as levy of penalty and/or deactivationof BOLT TWSs , is initiated as per the prescribed penalty norms.
  28. 28. Securities Pay-outDemat securities are credited by the Clearing House in thePool/Principal Accounts of the Members. BSE has also provided afacility to the Members for transfer of pay-out securities directly tothe clients beneficiary owner accounts without routing the samethrough their Pool/Principal accounts in NSDL/ CDSL. For this, theconcerned Members are required to give a client wise break up filewhich is uploaded by the Members from their offices to the ClearingHouse. Based on the break up given by the Members, the ClearingHouse instructs the depositories, viz., CDSL & NSDL to credit thesecurities to the Beneficiary Owners (BO) Accounts of the clients. Incase delivery of securities received from one depository is to becredited to an account in the other depository, the Clearing Housedoes an inter-depository transfer to give effect to such transfers.In case of physical securities, the Receiving Members are required tocollect the same from the Clearing House on the pay-out day.
  29. 29. Funds PayoutThe bank accounts of the Members having pay-out of funds arecredited by the Clearing House with the Clearing Banks on the pay-in day itselfIn case a Member fails to deliver the securities, the value of sharesdelivered short is recovered from him at the standard/closing rate ofthe scripts on the trading day.
  30. 30. ShortagesThe Clearing House arrives at the shortages in delivery of variousscripts by the Members on the basis of their delivery obligations andactual delivery.The Members can download the statement of shortages in delivery ofscripts in A, B1, B2, T, Z, F; Odd-lot & G group scripts on T+2 day,i.e., Pay-in day. After downloading the shortage details, the Membersare expected to verify the same and report discrepancy, if any, to theClearing House immediately. If no discrepancy is reported within thestipulated time, the Clearing House assumes that the shortage of aMember is in order and proceeds to auction/ close-out the same.Moreover, the value of shares delivered short is recovered from theMember at the standard/closing rate of the scripts on the trading day.
  31. 31. AuctionsAn Auction Tender Notice is issued by BSE to the Membersinforming them about the names of the scripts short or not delivered,quantity slated for auction and the date and time of the auctionsession on the BOLT. The auction for the undelivered quantities isconducted on T+2 day between 2:00 p.m. and 2.45 p.m. for all thescripts under Compulsory Rolling Settlements except those in "Z"group and scripts on "trade to trade" basis which are directly closed-out. A Member who has failed to deliver the securities of a particularcompany on the pay-in day is not allowed to offer the same inauction. The Members, who participate in the auction session, candownload the Delivery Orders in respect of the auction obligationson the same day, if their offers are accepted. The Members arerequired to deliver the shares in the Clearing House on the auctionPay-in day, i.e., T+3. Pay-out of auction shares and funds is alsodone on the same day, i.e., T+3.
  32. 32. Self-AuctionThe Delivery and Receive Orders are issued by BSE to the Membersafter netting off their purchase and sell transactions in scripts wherenetting of purchase and sell positions is permitted. It is likely in somecases, a selling client has failed to deliver the shares sold in asettlement to a Member. However, this may not result in failure ofthe Member to deliver the shares to the Clearing House as there wasa purchase transaction of his some other buying client in the samescrip and the same was netted off for the purpose of settlement. Insuch a case, the Member would require shares so that he can deliverthe same to his buying client, which otherwise would have takenplace from the delivery of shares by his selling client. To provideshares to the Members in such cases, they have been given an optionto submit the details of such internal shortages on floppies on pay-inday for conducting self-auction (i.e., as if they have defaulted indelivery of shares to the Clearing House). These shortages areclubbed with the normal shortages in a settlement arrived at by theClearing House and the auction is conducted by the Clearing Housefor the combined shortages.
  33. 33. Close-outClose-out is affected for cases when no offer for particular scrip isreceived in an auction or when Members who offer the scripts inauction, fail to deliver the same or shortages pertaining to thosegroups of securities for which auctions are not conducted. The close-out rates for different segments are as under o A, B and F group The close-out rate is higher of the following rates : a) The highest rate of the scrip from the trading day to the day on which the auction is conducted for the respective settlement. b) 20% above the closing rate as on the day of auction/close out of the respective settlement. o "Odd Lot", "T" and "Z" group and Patawat objections The closeout rate is higher of the following rates: a) The highest rate of the scrip from the day of trading to the day of auction of the respective settlements; b) 10% above the closing rate as on the day of auction/ close out of the respective settlement. o "G" group In case of shortages in "G" group, the shortages are closed out at Zero Coupon Yield Curve (ZCYC) plus a 5% penalty. The closeout amounts are debited to the bank accounts of those Members who have failed to deliver the securities against their sale obligations and credited to the bank accounts of those Members who had bought the securities but did not receive the same.
  34. 34. Rectification of Bad DeliveriesOne of the biggest problems faced by the investors in the secondarymarket while dealing in physical securities is that of bad deliveryarising out of various reasons. Based on the reasons, these baddeliveries are classified into two categories, namely; o Patawat (Settlement) Objections o Company Objections
  35. 35. Stock Exchange Trading in India MadeEasierStock exchange trading in India is carried out in 23 stock exchanges out ofwhich there are 2 major stock exchanges, namely National Stock Exchange(NSE) and Bombay Stock Exchange (BSE). Stock exchanges here areengaged in offering services for the stock traders and brokers to carry outtrading of bonds, stocks, and other securities.Benefit from Stock Exchange Trading Better returns from stock exchange market compared to interest on fixed deposits, savings bank account etc. Open to even the small investors. Start trading with small amount of money as no minimum investment threshold is present. Best way to earn easy money fast, over and above your regular income. No prior experience required for NSE trading and BSE tradingStock Exchange Trading has got better because of: Presence of transparency due to tighter regulation by SEBI Many instruments available to suit trader’s financial needs Access to your returns on an immediate basis Utility Bill (Telephone, Electricity etc)

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