Penalty on Defaulting Sellers:

• Imposition of Penalty:
• Sellers who fail to deliver the shares within the stipulated time are penalised.
• Calculation of Penalty:
• The penalty is typically the difference between the auction price and the original selling rate.
• If the auction rates are lower than the close-out rate, the close-out rate is used instead to calculate the penalty.
• Deduction of Penalty:
• This penalty amount is deducted from the defaulting seller’s account on T+2 day (two days after the original transaction date).

Example Scenario:

1. Transaction Day (T Day):
• The seller sells 100 shares of Company XYZ at ₹100 each.
2. Identification and Auction (T+1 Day):
• The exchange identifies a short delivery and conducts an auction.
• Suppose the auction price is ₹120 per share.
3. Penalty Calculation:
• The penalty is the difference between the auction price (₹120) and the original selling rate (₹100), which is ₹20 per share.
• If the auction price had been lower than the close-out rate, the close-out rate would be used for this calculation.
4. Deduction (T+2 Day):
• The penalty amount (₹20 x 100 shares = ₹2000) is deducted from the seller’s account on T+2 day.

By penalising defaulting sellers, the exchange ensures that there is a deterrent against failing to deliver shares and maintains market integrity.