What is meant by ‘X’ Settlement or Cash Settlement?
Cash settlement occurs when a client has purchased equity shares in delivery, but the exchange failed to deliver the shares on T+1 day. There are two ways settlements happen if there is a delivery shortage:
Internal Settlement: Internal settlement happens when the equity shares are internally settled between the clients of a particular brokerage.
For instance, Mr. X, a client of FYERS, sold his 21 shares of HDFC Ltd. Mr. Y, a client of FYERS, bought 17 shares of HDFC Ltd. Finally, Mr. Z bought 4 shares of HDFC Ltd. (Assuming all have been bought and sold at the same price). Therefore, FYERS will do an internal settlement by delivering the shares of Mr. X to Mr. Y and Mr. Z.
Cash Settlement: Cash settlement happens when the cash is given instead of crediting the shares to the client’s account for Buying shares.
For instance, Ms. L, a client of FYERS, bought 20 shares of MRF Ltd. however, the exchange failed to deliver the shares to Ms. L’s Demat in T+1 Day. There are no shares available to enforce an internal settlement. As a result, Ms. L will be given cash as the shares couldn’t be delivered.
Where can I find the list of Cash Equivalent Securities and Mutual Funds?
There are around 350+ Securities and Mutual Funds that are considered as cash equivalent by the exchange. These securities will be considered as cash component when trading in F&O Segment. For Instance, Mr. X has Liquidbees of ₹10 Lakhs in his ...
What is End of Day (EOD) MTM settlement?
It is mandatory for Futures derivative positions to be settled in cash on a daily basis. At the end of each day, settlement of open futures positions takes place at the exchange provided closing price. The difference between the opening price and the ...
What is rolling settlement?
In a rolling settlement, each trading day is considered as a trading period and trades executed during the day are settled based on the net obligations for the day. Trades in the rolling settlement are settled on a T+1 basis (i.e. 1st working day). ...
What is T+2 settlement?
T refers to the day on which the transaction took place. T+2 means that the buyer must pay the amount in full to the seller by the second trading day after the transaction and the seller must provide the shares to the buyer by the second trading day ...
What is cash component or cash equivalent and how to make use of it?
Cash component is a type of collateral margin available on pledging specific securities and can be used for trading in equity intraday or derivative contracts. It consists of liquid funds, such as money market instruments, government securities, ETFs ...