Zerodha Short delivery Cash settlement

Short delivery cash settlement on Zerodha

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When a seller fails to deliver shares for a CNC sell (short delivery), the exchange resolves the trade via the auction market or cash settlement. On Zerodha, the seller pays a penalty plus the price differential.

Process

  1. Seller defaults on T+1 delivery.
  2. Exchange auctions the shares to fulfill the buyer’s obligation.
  3. Auction price is typically higher than market (10-20% premium common).
  4. Differential = Auction price - Original sell price.
  5. Seller pays differential + penalty.

Cash settlement framework

For specific cases where auction doesn’t resolve:

  • Close-out price: Used as fallback.
  • Cash settled in lieu of delivery.
  • Specific SEBI rules for the mechanic.

Effect on Zerodha sellers

If you accidentally short-deliver:

  • Penalty + price differential debited from your account.
  • Total cost can be 20%+ of trade value.
  • Multiple short deliveries can escalate to broker action.

For details on related framework:

How to avoid

  • Don’t sell shares you don’t own. (Except via legitimate short-sell mechanisms like F&O or SLB.)
  • Verify holdings before placing CNC sell.
  • Check pledged status: Pledged shares cannot be sold via CNC without un-pledging.
  • T1 shares can be sold via BTST, but with delivery risk.

See also

External references

References

  1. SEBI, Short delivery and auction framework, sebi.gov.in.
  2. NSE India, Auction market for short delivery, nseindia.com.
  3. Zerodha Support, Short delivery handling, support.zerodha.com.

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