Equity delivery based trading in India follows both T+1 and T+2 settlement cycles.


T+1 settlement cycle

For shares bought on Monday  (T day), clients get the shares on Tuesday (T + 1 day). Similarly, if shares are sold on Monday (T day), clients are required to give Delivery of the shares on T+1 day after which he/she gets the proceeds from the sale (cash) to withdraw on (T+1 day).


As mentioned earlier, if a client sells any stock on T day, he/she is obligated to authorize the transaction on the CDSL portal using TPIN. If the client fails to authorize the transaction, shares won't get transferred to the Exchange from the client's Demat account.


Hence, clients would not be able to give delivery of these stocks on T+1 and would end up defaulting. This default is called “Short Delivery“.


Example:

Exchange ensures that if you buy shares, you get credit for the shares. Now, assume Client A bought 10 shares of Titan from Client B and Client B doesn’t authorize these shares on CDSL, then the Exchange will treat this as an ‘Short Delivery’ on T+1 day.


T+2 settlement cycle

For shares bought on Monday  (T day), clients get the shares on Wednesday (T + 2 day). Similarly, if shares are sold today (T day), clients are required to give Delivery of the shares on T+2 days after which he/she gets the proceeds from the sale (cash) to withdraw on (T+2 day).


As mentioned earlier, if a client sells any stock on T day, he/she is obligated to authorize the transaction on the CDSL portal using TPIN. If the client fails to authorize the transaction, shares won't get transferred to the Exchange from the client's Demat account.


Hence, clients would not be able to give delivery of these stocks on T+2 and would end up defaulting. This default is called “Short Delivery“.



Example:

Exchange ensures that if you buy shares, you get credit for the shares. Now, assume Client A bought 10 shares of Titan from Client B and Client B doesn’t authorize these shares on CDSL, then the Exchange will treat this as an ‘Short Delivery’ on T+2.

 

Now what happens is that the Exchange conducts an Auction and buys these shares for Client A in the Auction market and gives delivery of these shares to Client A on T+3 instead of T+2.


Note: In the case of physical settlement of derivatives, if the seller defaults on the delivery, the Exchange conducts an auction on T+3 days. In such a case, the settlement time will be T+4 days.