Assume on a Monday, you buy 100 shares of Reliance Industries at Rs.1,000/- per share. The total buy value is Rs.1,00,000/- (100 * 1000). The day you make the transaction is the trade date; brokers refer to this as the ‘T Day.’ (View Highlight)
When you place an order to buy, the broker quickly validates if you have the necessary funds. In this example, the order will go through only if you have Rs.1,00,000/- in your trading account; it will be rejected otherwise (View Highlight)
Note: If I am buying 100 shares @ Rs 1000 per share
Brokerage Zero for Equity Delivery. For intraday, charges are 0.03% or Rs.20/- whichever is lower, per executed order Zero (View Highlight)
Note: Charge number 1 when buying shares.
The charges are such when the broker is Zerodha
Security Transaction Charges(STT) 0.1% of the turnover 100/- (View Highlight)
Note: Charge number 2
Exchange transaction Charges 0.00345% of the turnover 3.45/- (View Highlight)
Note: Charge number 3
GST 18% of Brokerage + Transaction charges + SEBI charges 0.62/- (View Highlight)
Note: Charge number 4
SEBI Charges Rs.10 per crore of transaction 0.12/- (View Highlight)
Note: Charge #5
Rs.15/- towards stamp duty is applicable. Stamp duty is charged at 0.015% on the buy side (View Highlight)
Note: Charge #6
So an amount of Rs.1,00,000 plus 119.19 totaling Rs.1,00,119.19/- is required to carry out this particular transaction. Remember, the money is blocked in your account when you place a trade, but the stock is yet to hit your DEMAT account. (View Highlight)
Note: The extra charges are the brokerage and other charges
on the T day, the broker generates a ‘contract note’ and emails you the copy to your registered email id. A contract note is like a bill detailing all your daily transactions. You can save the contract note for future reference. A contract note gives you a break up of all daily transactions and the trade reference number. It also shows the breakup of charges charged by the broker. (View Highlight)
Brokers refer to the day after the transaction day as T+1 day. On T+1 day, you can sell the stock you purchased the previous day. If you do so, you are making a quick trade called “Buy Today, Sell Tomorrow” (BTST) or “Acquire Today, Sell Tomorrow” (ATST). Remember, the stock is not in your DEMAT account yet. Hence, a risk is involved, and you can be in trouble for selling a stock you don’t own. This doesn’t mean every time you make a BTST trade, you end up in trouble, but it does once in a way, especially when you trade stocks that are not liquid enough. (View Highlight)
On T day, the broker runs a post-trade process, where an obligation amount equal to what’s payable (for purchase) and receivable (for sale) is posted to their respective ledgers. (View Highlight)
The shares you bought will show up in your trading terminal with a ‘T+1’ tag, indicating that the shares are available for you to sell if you wish. But doing so results in a T+1 or BTST transaction with its associated risk. (View Highlight)
On Day 3, also called T+2, the settlement is due to the exchange. Assuming the purchaser and seller are trading via two different brokers, the funds are debited from the buyer’s broker’s pool account by the clearing corporation and credited to the selling broker’s pool account. Also, on T+2 day, the shares will reflect in the purchaser’s DEMAT account, indicating that you own 100 shares of Reliance. (View Highlight)
The day you sell the stocks is again referred to as the ‘T Day’. The stock gets blocked when you sell the stock from your DEMAT account, and by the end of the day, the stocks are ‘earmarked’ for settlement. (View Highlight)
Before the T+2 day, the earmarked shares are delivered to the depositary (View Highlight)
On settlement day, the blocked shares are debited from your demat account and moved to the clearing corporation for payin. Against the debit of such shares, you’d have received a credit for the sale after deducting all charges (View Highlight)
note that you will receive 80% of the funds on T+1 and the remaining 20% on T+2. In other words, the seller will be settled fully on a T+2 basis, just like how the buyer is settled. (View Highlight)
As far as you are concerned, you need to remember that equity transactions are settled on T+2 basis, meaning, if you are a buyer, you will get the shares on T+2, and if you are a seller, the funds are credited on T+2 basis. (View Highlight)
From the time the shares were debited until they were settled, the client shares lie in the broker’s pool account, possibly allowing a broker to misuse these securities. SEBI identified this as a potential risk and introduced “earmarking” for settlement. (View Highlight)
In this new earmarking system, shares are no longer debited from the client’s account; they are only earmarked for settlement. Think of earmarking as a temporary hold on the securities towards an upcoming settlement for the sale transaction initiated by the client. (View Highlight)
On settlement day, the shares are debited from the investor’s account and credited to the clearing corporation. This new process eliminates the need for brokers to hold client shares in their pool account, thereby eliminating the risk that comes along. (View Highlight)
By the way, our regulators are continuously working towards safeguarding retail investors from any possible pitfalls and, in the process, improving the efficiency of the market structure. One such effort is to move to a T+1 settlement for all equity settlements by March 2023. (View Highlight)
