Market Trades- Trading Member – Rolling Settlement – Stock Auction – Stock Exchange – Rolling Settlement

Q. What should I do when I want to open an account with a DP?

.A. You can approach Broker Securities Ltd or any DP of your choice and fill up an account opening form. At the time of opening an account, you have to sign an agreement with DP in a NSDL prescribed standard agreement, which details your and your DP’s rights and duties.

Q. What do you mean by ‘Market Trades’ and ‘Off Market Trades’?

A. Any trade settled through a clearing corporation is termed as a ‘Market Trade’. These trades are done through stock brokers on a stock exchange. ‘Off Market Trade’ is one which is settled directly between two parties without the involvement of a clearing corporation. The same delivery instruction slip can be used either for market trade or off-market trade by ticking one of the two options.

Q. How do I deliver or receive shares?

A. In case of sales, the investor would need to transfer the shares to the pool account of Broker for the specified settlement number. The delivery should necessarily come from the demat account of the investor and not from any other person. Similarly Broker would directly transfer shares bought to the account of the investor.

Q. How do I make or receive payments?

A. Payments to Broker has to be made via a Account Payee cheque/Demand Draft in favor of Broker Securities Limited. The payment should necessarily come from the bank account of the investor and not from any other person. Similarly Broker would pay an Account Payee cheque in the name of the investor, which will also contain the Bank name and account number of the client.

Q. How long does it take to receive my money for a sale transaction and my shares for a buy transaction?

A. The pay-out of funds and securities to the clients by Broker will be within 24 hours of the pay-out.

Q. What is a Rolling Settlement?

A. In a Rolling Settlement trades executed during the day are settled based on the net obligations for the day. In NSE and BSE, the trades pertaining to the rolling settlement are settled on a T+2 day basis where T stands for the trade day. Hence trades executed on a Monday are typically settled on the following Wednesday (considering 2 working days from the trade day). The funds and securities pay-in and pay-out are carried out on T+2 day.

Q. What is an Auction?

A. The securities are put up for auction by the Exchange on account of non-delivery of securities by the selling trading member to ensure that the buying trading member receives the securities due to him. The non-delivery by the trading member could arise on account of short delivery. The Exchange purchases the requisite quantity in the Auction Market and gives them to the buying trading member.

Q. What happens if I could not make the payment of money or deliver shares on the pay-in day?

A. In case of purchase on your behalf, the member broker has the liberty to close out transactions by selling securities in case you fail to make full payment to the broker for the execution of contract before pay-in day as fixed by Stock Exchange for the concerned settlement period unless you already have an equivalent credit with the broker. The shortages in case of sales are met through auction process and the difference in price indicated in Contract Note and price received through auction is paid by member to the Exchange which is then liable to be recovered from the client.

In both the cases any loss in transactions will be deductible from the margin money paid by you.

Q. What happens if the shares are not bought in the auction?

A. If the shares could not be bought in the auction i.e. if shares are not offered for sale in the auction, the transactions are closed out as per SEBI guidelines. The guidelines stipulate that “the close out price will be the highest price recorded in that scrip on the exchange in the settlement in which the concerned contract was entered into and upto the date of auction/close out OR 20% above the official closing price on the exchange on the day on which auction offers are called for, whichever is higher.”

Since in the rolling settlement the auction and the close out takes place during trading hours the reference price in the rolling settlement for close out procedures would be taken as the previous day’s closing price.

Q. What happens if I do not get my money or share on the due date?

A. In case a broker fails to deliver to you in time and make the proper payment of money/shares or you have a complaint against the conduct of the broker, you can file a complaint with the respective stock exchange. The exchange is required to resolve all complaints. To resolve the dispute the complainant can also resort to arbitration as provided on the reverse of Contract Note /Purchase or Sale Note. However, if the complaint is not addressed by the Stock Exchanges or is unduly delayed then the complaints along with supporting documents may be forwarded to Secondary Market Department of SEBI. Your complaint would be followed up with the exchanges for expeditious redressal.

In case of a complaint against a sub-broker, for redressal the complaint may be forwarded to the concerned broker with whom the subbroker is affiliated.