Comment on Policy on settlement of compulsory delivery derivative contracts — Update Oct 2019

Ankush Talwar commented on 06 Nov 2019, 09:26 AM

Many thanks Faisal.

Just one more doubt, quoting this from the forum.

The entire process:

a) On T Day Mr. X sells the stock.

b) On T+2 Mr. X fails to deliver the stock.

c) On T+2 when the shares are not delivered, the exchange blocks a sum of money from the brokerage’s account which is called “Valuation Debit”. The Valuation Debit is the closing price of the stock on the day preceding the Settlement day (basically, closing value of stock on T+1, as settlement happens on T+2).

d) On T+2, the exchange conducts the auction and purchases the stock from the auction participants on behalf of the defaulting seller.

e) On T+3, the exchange gives the shares to the buyer and sends an Auction note to the defaulting broker. The broker then passes on such auction charge to the defaulting client.

My question is when does the block gets released.


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