Comment on Consequences of Short delivery - NSE/BSE

Venu Madhav commented on 04 Jul 2014, 11:39 AM

Whenever you buy shares, you are entitled to receive them from the Exchange. The Broker receives such shares from the Exchanges and credits it to the buying client. Now let’s assume clients X&Y trading with the same broker. Client X buys 100 shares of TATA Steel and client Y sells 100 shares of TATA Steel on the same day. In such case, the Exchange is not obligated to deliver any shares and the broker is required to do an internal adjustment where he debits shares from Client X’s account and credits it to Client Y’s account. Now let’s assume Client Y does not deliver the shares he sold. Such case is considered as a case of Internal Shortage.

Now the broker can either post a penalty to Client Y and give credit of such penalty to Client X (as mentioned in the link provided by you) or buy shares on behalf of client Y and give credit of such shares to Client X.

At Zerodha, we follow the latter as we would have to look into the interests of both the buying and selling clients and feel its unfair to penalise the selling client to the extent of 10% higher than the trading price of the scrip.

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