Overview of day end settlement
Basics of stock market
• Why invest?
• who regulates
• financial interdependence
• IPOs
• Stock Market returns
• Trading system
• Day end settlements
• Corporate actions
• News and Events
• Getting started
• Rights, ofs,fpo and more
• Notes
7.1 Overview of day end settlements
Although clearing and settlement are very theoretical, it is crucial to comprehend the principles involved. Investors and traders don’t need to worry about how transactions are cleared and completed because skilled intermediaries will handle this responsibility expertly on your behalf.
But if the clearing and settling process is not understood, learning won’t seem to be complete. We will therefore examine what takes place in the background between the time you purchase a stock and the time it appears in your DEMAT account.
7.2 What happens when you buy a stock?
Let’s say you purchase 100 shares of HDFC on Monday, June 23, 2014, for Rs. 1,000 each. The total cost of the purchase is Rs. 100,000 (100 x 1000). The trade date, abbreviated as “T Day,” is the day you complete the transaction.
Your broker will charge Rs. 100,000 plus any applicable fees toward your purchase by the end of the trading day. The fees listed below would be incurred if the deal went through Zerodha.
| Sl No | Chargeable Item | Applicable Charges | Amount |
| 1 | Brokerage | Zero charges on Equity Delivery or 0.03% or Rs.20/- whichever is lower for intraday trades | Zero |
| 2 | Security Transaction Charges | 0.1% of the turnover | 100/- |
| 3 | Transaction Charges | 0.00325% of the turnover | 3.25/- |
| 4 | GST | 18% of Brokerage + Transaction charges | 0.585/- |
| 5 | SEBI Charges | Rs.10 per crore of transaction | 0.1/ |
| Total | 103.93/- | ||
As a result, on the day of the transaction, the full sum of Rs. will be debited from your trading account. 103.93 (which includes all applicable fees). Keep in mind that although money leaves your account, stocks have not yet arrived in your DEMAT account.
The broker also creates a “contract note” and sends you a copy of it on the same day generated bill that includes a list of all the purchases you’ve made is similar to a contract note. It is wise to keep this important document on hand for future use. A contract note typically includes the trade reference number and a breakdown of all transactions carried out during the day. It also outlines the breakdown of the broker’s fees.
Day 2 – Trade Day + 1 (T+ day, Tuesday)
The T+1 day is the day following the transaction that you made. You can sell the stock you bought the day before on day T+1. By doing this, you are essentially making a “Buy Today, Sell Tomorrow” (BTST) or “Acquire Today, Sell Tomorrow” trade (ATST). Keep in mind that the stock is not yet in your DEMAT account. There is therefore a risk, and you run the risk of getting into trouble for selling a stock that you don’t own. This doesn’t necessarily mean that you get into trouble every time you make a BTST trade, but it does occasionally, particularly when you trade B group and illiquid stocks. We purposely won’t discuss this subject at this time because of how complicated this situation is.
If you are a beginner in the markets, I advise against engaging in BTST trades unless you are aware of the risks.
From your perspective, nothing happens on T+1 day. However, in the background, the exchange, exchange transaction fees, and security transaction tax are collecting the money needed to buy the shares.
Day 3 – Trade Day + 2 (T+2 day, Wednesday)
On day 3, also known as the T+2 day, at approximately 11 AM, shares are debited from the person who sold you the shares and credited to the brokerage with whom you are trading. By the end of the day, the brokerage will then credit your DEMAT account. similar to how the person who sold the shares received credit for the money that was taken from you.
Now that you own 100 shares of Tata, the shares will start reflected in your DEMAT account.
In actuality, you should only plan on getting the share in your DEMAT account by the end of day T+2 if you buy a share on day T Day. Starting at T+3day, shares will go on sale.
7.3 What occurs when a stock is sold?
The trading day, abbreviated as “T Day,” refers to the day you sell the stocks. When you sell shares using your DEMAT account, it becomes prohibited. The blocked shares are delivered to the exchange before T+2 day. After deducting any necessary fees, the sale’s proceeds would be deposited to your trading account on T+2 day.
Appreciation
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