Shortages Handling
On the settlement day NSE CLEARING accepts pay-in of securities made by members through depositories and identifies the shortages. The members are debited by an amount equivalent to the securities not delivered and valued at a valuation price. This is known as valuation debit. For all such short deliveries NSE CLEARING conducts a buying-in auction on the T+2 day, after completion of the pay-out, through the NSE trading system.
If the buy-in auction price is more than the valuation price, the CM is required to make good the difference. All shortages not bought-in are deemed closed out.
Valuation prices at which valuation debits are conducted are calculated as below:
Valuation Price for failure to deliver
The valuation price for securities which were not delivered on the settlement day is the closing price of such securities on the immediate trading day preceding the pay-in day. The closing price is the price as announced by NSE at the end of the trading day.
Valuation Price for Bad Delivery
The valuation price for securities which constitute bad deliveries, shall be the closing price of such securities, on the trading day preceding the settlement day unless prescribed otherwise from time to time by the relevant authority.
Closing out in the case of failure to give delivery for Normal Market
Close out will be at the highest price prevailing in the NSE from the day of trading till the auction day or 20% above the official closing price on the auction day, whichever is higher.
Closing out in case of failure to give delivery for ‘IL’ and ‘BL’ Market Deals
Any shortages in the ‘Inter Institutional’ – IL segment and ‘Block trades’ – BL window 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.
Closing out in case of failure to give delivery for Trade-for-trade – Surveillance (TFT-S) deals
Any shortages in TFT-S 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.
Closing out in case of failure to give delivery in Auction Market
When the auction seller fails to deliver in part or full on auction pay-in day, the deal will be closed out at the highest price prevailing in the NSE from the day on which the trade was originally executed till the day of closing out or 20% over the official closing price on the close out day whichever is higher and will be charged to the auction seller unless otherwise specified.
Compulsory Close-out of securities under Corporate Action
In cases of securities having corporate actions and no 'no-delivery period' for the corporate action, all cases of short delivery of cum transactions which cannot be auctioned on cum basis or where the cum basis auction pay out is after the book closure / record date, would be compulsory closed out at higher of 10% above the official closing price on the auction day or the highest traded price from first trading day of the settlement till the auction day.
Closing out in the case of non rectification/replacement for bad delivery
Shortages are closed are at the highest price prevailing in the NSE from the day of trading till the day of the closing out or 20% above the official closing price on the auction day, whichever is higher.
Closing out in the case of non rectification/replacement for objection cases
Close out in the case of non rectification / replacement for objection cases will be at 20% above the official closing price on the auction day.
Rectified / Replaced bad deliveries reported as bad delivery (Rebad delivery)
Rectified / replaced shares reported as bad delivery (Rebad delivery) will be closed out at the highest price prevailing in the NSE from the day on which the trade was originally executed till the day of the closing out or 10% above the official closing price on the auction day whichever is higher.
Company objection cases reported as bad delivery
Rectified /replaced company objection reported as bad delivery will be closed out at 10% above the official closing price on the auction day.
Close out price for deleted security
Security for which trading has been discontinued on the Exchange close out will be the last 26 weeks average trade price on the exchange with a close out mark up of 20%.
Close out price for bonds
In case of failure to give delivery, non rectification/replacement of bad delivery, rectified/replaced bad delivery subsequently reported as re-bad, auction non-delivery, and auction delivery reported as bad delivery, closing out price will be the highest rate prevailing on the Exchange from the first day of the relevant trading period till the day of closing out or 5% over the official closing price on the auction day, whichever is higher for bonds, debentures assigned a credit rating of triple A and above. For the other debentures and the bonds without the triple A credit rating, the close out mark up of 20% will be applicable.
In case of non rectification / replacement of company objection and rectified/replaced company objections reported as bad delivery, closing price will be 5% over the official closing price on the auction day.
Closing Out for LPM Deals
In the case of failure to give delivery close out will be at 20% over the actual trade price. In the case of non rectification/replacement for bad delivery close- out will be at 10% over the actual trade price.
In the case of non rectification/replacement for objection cases close-out will be at 20% above the official closing price in regular market on the auction day.
Members are required to ensure that adequate funds are available in the clearing account towards all obligations, on the scheduled date and time.
Trading and/or clearing facility of members failing to fulfill their funds obligations, in all markets including the valuation debit raised on account of securities shortages to Clearing Corporation, shall be withdrawn. Further, securities pay-out, due to such clearing member shall also be withheld.
The above provisions apply if net cumulative fund shortage for a member is:
- Equal to or greater than Rs. Five (5) lakhs at the end of pay-in.
- Equal to or greater than Rs. Two (2) lakhs for six (6) or more occasions in the last three (3) months on any given day
In case, the member is disabled on account of (2) above, on making good the shortage amount, the member shall be permitted to trade subject to its providing a deposit equivalent to its cumulative funds shortage as the 'funds shortage collateral'. Such deposit shall be kept with the Clearing Corporation for a period of ten settlements and shall be released only if no further funds shortages are reported for the member in next ten consecutive settlements. Members may further note that there shall not be any margin benefit or any interest payment on the amount so deposited as 'funds shortage collateral'. The amount may be provided by way of cash, fixed deposit receipts, or bank guarantee, equivalent to the cumulative funds shortage.
Apart from the above, the member will be required to pay a penal charge on the amount outstanding at the end of the day, till the amount is recovered