Auction Timing & Participants

The auction is conducted every day between 2:00 pm and 2:45 pm. Only member brokers of the exchange can participate and sell shares which are short delivered. To avoid any conflict of interest the exchange doesn’t allow members whose client has defaulted (short delivered) to take part in auction.

The auction price

The exchange does not specify the price at which the auction will take place but will allow auction participants to sell shares within a pre-specified range.

Upper limit of the range: 20% higher than the closing price of the share on the day prior (T+1, Wednesday) to the day of auction. If the closing price of ACC on T+1 was 1100 then the upper limit will be 1100+ (1100*20%) =1320

Lower limit of the range: 20% lower than the closing price of the share on the day prior to the day of auction. i.e. 1100-(1100*20%)=880 .

Thus an auction participant can offer to sell 100 shares of ACC in the price range of 880 to 1320.

Few more terminologies

Before we proceed further let us understand the concept the Valuation price & Valuation debit.

Valuation Price: Is the closing Price of the share not delivered on T+1 day. In our example it is Rs.1100

Valuation Debit: Closing Price of the share not delivered on T+1 day x No. of shares not delivered. i.e 1100 x 100=1,10,000

An amount equivalent to valuation debit is blocked by the exchange from the client’s account when shares are not delivered on T+2.

On Auction Day

Case I: Share price went up

Assume in the Auction market a fresh seller is offering to sell 100 ACC shares @ Rs.1150. The Exchange buys the shares @ Rs.1150 & gives the shares to the Buyer. Since there has been a default from the seller’s end the difference between auction price (1150) & valuation price (1100) of Rs.50 will have to be paid by the seller.

Hence the total amount debited will be= Selling price -[Valuation debit + ( (auction price x quantity)-valuation debit)]

                                        = 1,05,000 – [1,10,000 +( 1,15,000 – 1,10,000)]

                                        = -10,000

Case II: Share price dropped

Assume after you sold the share of ACC @ Rs.1050 the price of ACC dropped and closed at 1000/- on (T+1, Wednesday). The valuation debit that would be debited from the brokerage’s (client’s) account will be Rs.1, 00,000/-.

On the auction day (T+ 2) if the auction buy price is Rs 980. The client won’t get the benefit of lower auction price as the exchange wants to discourage short delivery. The price debited by the exchange will be the higher of valuation debit or the price at which the stock has been bought in auction. Hence the amount debited from the client’s account will be Rs.1, 00,000 and the difference of Rs.5000 between the auction price & valuation price will be transferred to the Investor Protection Fund.

Case III: Close-out

All shortages not bought are deemed closed-out and are cash settled on the basis of close out rate. Close out will be at the highest price prevailing in the exchange from the day of trading till the auction day or 20% above the official closing price on the auction day, whichever is higher.

Case IV: Share falls in Trade for Trade (T2T) segment

Any shortages in TFT-S (Trade-for-trade) will be directly closed-out on the settlement at the highest price prevailing in the Exchange from the day of trading till the T+1 day or 20% above the official closing price on the T+1 day, whichever is higher, or as declared from time to time.

Case V: Internal Short Settlement

Internal Short Settlement is a special case when both the buyer and the seller belong to the same broker.  Please visit out Internal Short Settlement article to learn more about the process followed for the same.

 

See also:

What is Short Selling of shares?

What is Short Delivery?

What can cause a Short Delivery?

What happens in case of Short Delivery?

How does Internal Short Settlement work?

Comments

  1. sneha

    i have sold 100 shares of HCC @ Rs 26.6 which come to Rs 2660.
    due to some reason i couldnt place the buy order.

    pls do calculate and tell me how much will the penalty and charges i need to pay

    1. Trade Smart Online

      Hello Sneha,
      To know whether you have been charged penalty, it is important to know whether you sold stocks in CNC or MIS product type. We request you to send an email to [email protected] with your client code. Our team will check and revert back to you.

  2. Ronak

    hello sir
    I have sold 600 shares of WELSPUN INDIA @ 51.25 which come to Rs.30750 this share is to circuit then i not buy them
    plz calculate & tell me to how the LOSS in share
    plz sir inform to immediately…

    1. Trade Smart Online

      Hello Ronak,
      In case of short sell, penalty is based on the exchange pre-specified range of 20% upper or lower range. In case of your example, let us assume you sold on Tuesday @ 51.25 and the closing price of that stock on Wednesday would be Rs.60. Hence, upper limit is 72[(60*20%)+60]. Lower limit is calculated as 60-(60*20%)= 48. Hence, share can be bought back in your account on Thursday between the range of Rs.48 to Rs.72.

  3. Ronak

    but sir welspun india is to circuit 5% then charges is required to base of 20%?sell on thursday at 51.25&frideay is colsing 53.80 then what are the exactely charges & not possible for exactely charges then approximation charges? plz inform sir….immediately

  4. chander singh

    please give a sample bill of 10 nifties options short and 10 stock futurs long and the margin required for each or any other scrip.

    1. Trade Smart Online

      Hello Chander Singh,
      We would request you to put all the contract details in the margin calculator to know how much margin required to create the said position. Also our brokerage calculator lets you know how much statutory charges and brokerage charges levied for the transaction. You can always get to us for any further assistance.

  5. Shyamsundar Patidar

    Hello,

    Today on 16Sep2016, I short-sell of “10” EICHER MOTERS share at the rate of Rs29000 but not able buy it back and market closing price was 23135.25, please tell me what would be buy Ratio as per this.

    And price you are talking about it always calculated as per Wednesday market closing rate or any concept behind that.

    Regards
    Shyamsundar

    1. Trade Smart Online

      Hello Shyamsundar,
      We would request you to send an email on [email protected] mentioning your client ID so that we can check at what price the stock was sold and other things along with it. We will update you after the analysis of your query.

  6. Akash

    Hello Sir,
    Yesterday on 21st Sept (Wednesday) I did short sell of “3000” shares at the price of Rs.3.40 but due to unavailability of seller my stock went for auction. Today on 22nd sept again it reached the upper circuit of Rs.3.70. So please tell me what will be the exact amount I will be loosing in auction and if possible please suggest something to avoid huge lose.

    1. Trade Smart Online

      Hello Akash,
      As you said, you short sold on 21st Sept. and as per T+2 settlement cycle, your trade will get settled on 23rd. You will come to know your exact loss on the 23rd evening after the entry is made in your account. Please share your client ID, we will check your orders and update you with the figures. Or you can use our online chat support available on our website.

  7. M.SARAVANAN

    Hello Sir,
    Yesterday on 8 DECEMBR I did short sell of “2900” shares at the price of RS.53.55, WHAT IS MY LOSS ,MY CLINT ID 92302373

    1. Trade Smart Online

      Hello Saravanan,
      Kindly give us your client code which starts from “Y”. We will check your account and let you know about your short sell. As per exchange settlement cycle, it takes T+2 trading days for the settlement. That mean, stocks sold on Dec 8, would get settled on Dec 12 i.e today in the afternoon after which you can check your profit or loss booked on account of short sell.

  8. ANIKET ULHAS GHEWADE

    i have sold 100 shares of bharatfin @ Rs 575 which come to Rs 57500
    due to some reason i couldnt place the buy order.

    pls do calculate and tell me how much will the penalty and charges i need to pay…

  9. deepak

    Mainy galti se 30 share imfa ke sale kar diya hai after two days jab auction that tab imfa mare rate se 10rs beech band hua hai toh ab kya hoga

  10. Raj

    Hi There,

    I sold JPASSOCIATES at 16.60 on Tuesday (01-03-2017), but I forgot to place the buy order. Now the Last traded price of it is 14.95. Can I now execute buy order tomorrow to avoid penalty. If not, kindly let me know how much loss I incur.

    Thanks in advance,

    Regards,
    Raj

    1. Trade Smart Online

      Hello Raj,
      In this case, there are two things to happen,
      1) In case you sold JP shares in CNC that means you had the delivery of JP shares in your demat account. Shares will be taken from your demat account and given to exchange. No penalty will be charged.
      2) In case you sold in MIS then our RMS system will buy back all the shares at market price after 3.10pm as you cannot take the delivery of shares if you placed your order in MIS product type. We will buy back only when there are sellers in the market. If no sellers then stocks will go into Auction and penalty will be levied.

    1. Trade Smart Online

      Hello Ravikant,
      In case you forget to buy back shares that you short sold on that day then RMS system squares off your position after 3.10pm at market price if there are sellers available at that time. Kindly share your client code. We will check whether the order has gone to auction or whether it got recovered at 3.10pm RMS square off.

    1. Trade Smart Online

      Hi Ravikant,
      Thank you for the DP ID. It seems you do not have DP account with us. You may check at what price the auction took place and what is the loss. However, as per auction process, exchange takes the highest price from short sell day to auction day and buy backs the shares in your account.
      Example: Suppose you short sold at Rs.100 on Monday and do not buy back on same day for some reason. In this case auction will take place on Wednesday. If stock price was 105 on Tuesday and goes up to 110 on auction day(Wednesday) then exchange will take the highest price(110) and buy back at 110 for you. Auction penalty will be levied based on stocks category. If the stock is T group (Trade-to-trade stock) then 20% penalty will be levied. I.e stocks will be bought in your account at 132(110+110*20%).

      Hope we addressed your query.

    1. Trade Smart Online

      Hello Ashok,
      Whenever any short sell position is created in MIS, it would be bought back after 3.10pm (as per our RMS policy) if there are sellers available in the market. Kindly share your client code, we will check about your position and get back to you.

  11. Pingback: If I short-sell a particular stock then before what time I should Square-off my position and what if I fail to do so? | Knowledge Base

  12. shankar

    Hello sir,

    I sell 5000 Qty SAIL @ 63.60 in margin on 25.07.17 & I did not closed it. Now it goes to Auction process.What will Happen?

  13. Manoj Kumar Mishra

    I have made a short sale in margin 1000 shares of Balrampur Chini @175:35 on 7th of August 2017.
    But price is declining contineously. Can I escape my loss anyhow ?

    1. Trade Smart Online

      Hello Manoj,
      In case of short sell, Auction will be done from exchange and the same cannot be escaped. This settlement will be done by the exchange on T+2 days from short sell day.

  14. Vivek Shadangi

    I had shorted 240 shares of [email protected] on Thursday 14th September 2017.
    It touched the upper circuit at 74[email protected]%.On Friday and on monday it went high of two consecutive upper circuit.

    It touched perhaps 903 on Mondays.

    The settlement debit amount given by Kotak has come 82000.
    This is panicky.

    Can you please help?

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