How does short delivery impact buyers?

How does short delivery impact buyers?

Q1: What is short delivery?

Short delivery occurs when a seller fails to deliver the shares to the buyer by the agreed settlement date, usually T+1 in India. This can happen due to logistical issues or discrepancies in the seller’s holdings.

Q2: How does short delivery affect me as a buyer?

Delayed Delivery:

If there is short delivery, you may experience a delay in receiving your shares. The exchange typically conducts an auction on T+1 to procure the undelivered shares. If successful, the shares will be delivered to you on T+2.

If the auction fails to procure the shares, the transaction may be settled in cash. This cash settlement is usually at a premium—about 20% higher than the closing price on the auction day. Such delays can impact your ability to sell the shares or participate in corporate actions on time.

Q3: Will I miss out on dividends or other corporate benefits if there is short delivery?

Yes. If shares are not delivered by the record date for dividends or other corporate actions (such as bonus issues or stock splits), you may miss out on these benefits. This could affect your expected returns, as any dividends or corporate actions declared during the delay will not apply to you.