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According to SEBI circular dated 19th Nov, 2019, all the brokers are now required to collect and report margins in the cash segment. This is currently applicable in the derivatives segment. A flat 20% upfront margin needs to be collected in the cash segment. Let’s find out the reason why SEBI made this move. Earlier brokers allowed clients to buy/sell stocks for delivery without asking them for upfront margins or delivery. The client was required to fund the account until
Read MoreIf the shares are not bought in the auction, the close-out is done by paying compensation to the buyer. A payment equivalent to any of the following is made: The value of the short delivered security at the highest price prevailing in the stock exchange from the day of trading till the auction day or 20% above the official closing price on the auction day, whichever is higher is paid. For all short deliveries for; Companies listed in the “Z
Read MoreAccording to the exchange rules, the auction amount is always debited to the auction seller. It is the seller who is liable for fulfilling the shares’ obligations. If you wish to avoid such situations, it is advisable to sell the shares after confirming the delivery of shares. There are always chances that the shares may come short.
Read MoreScenario1- Internal Process As Per T+2 Basis Internal short settlement is a special case scenario wherein both, the buyer and the seller, belong to the same broker. In such a case, the short delivery is settled internally by the broker. The settlement here is done among the broker’s clients instead of the exchange through a buy-in auction. If there is any short delivery, the funds will be credited to the buyer against shares and funds will be debited to the
Read MoreQ. Which stocks I can lend in SLB? A. Presently the securities on which derivatives are available in the F&O segment are available for transactions in SLB. Q. What is the settlement date for the SLB contract? A. SLB contract settles on the first Thursday of every month. Q. What are the various margins applicable to the borrower and lender on T-Day? A. In the case of the borrower, only the lending fee is levied upfront as a margin. In
Read MoreSLB or stock lending and borrowing is a system in which a trader can borrow shares that they do not already own or can lend the stocks that they own. An SLB transaction has a rate of interest and a fixed tenure. Securities lending and borrowing Mechanism Why do traders do stock lending & borrowing? Lenders – Lenders can earn extra income by lending the stocks from their portfolios. Borrowers – Borrowers can borrow the stocks for arbitrage, for short
Read MoreBonus shares are the additional shares offered by a firm to its existing shareholders as a “bonus”. This is done when the company is not in a position to pay dividends to its shareholders despite earning decent profits for that particular quarter. Allotments are typically made in a fixed ratio e.g. 1:1, 2:1, 3:1, etc. A 2:1 bonus ratio means the existing shareholders (as on the record date) will get 2 additional shares for every 1 share held at zero
Read MoreA stock split is one of the ways of increasing retail participation and is a quite common phenomenon in the stock market. A stock split is a firm’s process of dividing the existing shares into multiple shares to increase the number of outstanding shares held by a company. An illustration will make things clear: Split Ratio Old FV No of the shares held before split Share Price before split Investment Value before split New FV No. of shares held after
Read MoreIssuing rights shares is yet another way companies turn to, for raising the required capital. Through a rights issue, companies grant shareholders the rights, but not the obligation, to buy new shares. Shareholders get the new shares at a discounted market price in proportion to their existing shareholding. Why Do Companies Go For Right Issues? Companies need capital for expansion and hence turn to the issue of shares. Instead of issuing shares to the public at large and diluting the
Read MoreShare buyback/ repurchase is when a company buys back its own shares from the existing shareholders. Share Buyback is an alternative, tex efficient way to return money to shareholders. There are two ways to buyback shares: Companies can buyback shares from the open market over an extended time period, or they may present a tender offer to shareholders. Here, shareholders have an option to submit (or tender) a portion or all of their shares within a certain time frame at
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