So friends, I know after reading all the previous
blogs and understanding all the do’s and don’ts in the stock market, you
must be raring to trade now. Sincere apologies from us for being a
spoil sport. Here’s another topic which is extremely important, and
which must be covered, read and understood first before you could start
trading In the Stock Market.
You need to understand when you can get shares in your Demat account
after purchasing them and when you can get your money once you have sold
your stocks. If you were thinking that the process was instantaneous,
than Sir, we regret to inform that you were wrong.
So how and when do we get our money or stocks? The answer to the
question lies in understanding the Settlement Cycle and other terms
related with it. So let’s take them up one by one.
WHAT IS SETTLEMENT?
Settlement is a process through which:
a. Buyer receives the stocks for which he has made the payment
b. Seller receives his honey for the sold stocks
WHAT IS SETTLEMENT CYCLE?
Settlement Cycle is a duration in which the settlement has to take
place. To place it in more simple terms, the duration in which the buyer
gets the stocks for which he paid and the seller receives the money for
the stocks that he sold.
WHAT IS ROLLING SETTLEMENT?
Rolling Settlement is the process of settling trades in the stock market
on successive dates so that trades executed today will have a
settlement date one business day later than trades executed yesterday.
In context of Indian stock market, the trades in rolling settlement are
settled on T+2 days.
If we consider T as the current trading day, T+2 would be the Trading
day which is two days after today. Let’s say if today is Monday, T+2
would be Wednesday. But if today is Friday, T+2 would be on Tuesday as
Saturday and Sunday are not Trading days.
It is also important to note that all intervening holidays, which
include bank holidays, exchange holidays, Saturdays and Sundays, are not
counted as trading days.
This means, if you sell shares, the money is received by your broker on
the third day. If you buy shares, your broker gets them on the third
day.
The table below makes it much simpler for us to understand:
| ACTIVITY |
SUB ACTIVITY |
DAY |
| TRADING |
ROLLING SETTLEMENT |
T |
| CLEARING |
DELIVERY GENERATION |
T+1 |
| SETTLEMENT |
SECURITIES AND FUNDS PAY IN AND PAY OUT |
T+2 |
| POST SETTLEMENT |
AUCTION |
T+3 |
|
SHORT DELIVERY REPORTING |
T+4 |
|
AUCTION SETTLEMENT |
T+5 |
|
PAY IN AND PAYOUT FOR SHORT DELIVERY WHICH WAS REVISED |
T+6 |
UNDERSTANDING THE PAY IN AND PAY OUT DATE
What is Pay-in?
In Pay-in of securities all the shares’ obligations are picked up from
the client’s beneficiary account and transferred to Broker’s pool
account. All the shares are then delivered to the clearing corporation
as per obligation with Exchanges.
In Pay-in of funds, the funds are transferred from a client’s bank
account to Broker bank account. All the funds are then transferred to
the clearing corporation as per obligation.
What is Pay-out?
In Pay-out of securities, shares are received from the Clearing House
and the same is transferred to Broker pool account. All the shares are
then transferred to the client beneficiary account.
In Pay-out of funds, funds are transferred from the Clearing House to
Broker Bank a/c. All the funds are then transferred to the client’s bank
a/c.
We hope, that after this hard-core but extremely important session
you will now have a clear understanding of when you can receive the
stocks in your account after purchasing them and when you can receive
the money after selling your stocks.
Do like us on Facebook Page and follow us on our Twitter handle for regular updates on all the current and relevant news and more informative articles like these.
At Moneypalm, it is our constant endeavour to enlighten our clients, so
they take better decisions which allows their investments to grow,
because we always believe that “Together We Grow”