When do You Get Delivery of Stocks After Buying
You know that when you buy stocks the delivery of stocks will be received on T+2 date. But have you ever wondered what goes on between the time you place the order and it is executed and the time you get the delivery of stocks in your demat account? That is the all-important process called clearing and settlement process. The entire clearing and settlement process goes on behind the scenes so you don’t realize the importance of this activity. However, whether it is about buying and getting delivery of stocks or about selling and getting cash in your bank, it has to go through the clearing and settlement process.
What is delivery?
Let us quickly dwell on the concept of physical delivery of shares before we get into the details of the clearing and settlement process. In the past, it was possible to get physical delivery of shares in the form of certificates. However, since late 2018, SEBI has barred all forms of delivery or exchange settlement of physical delivery of shares. Even if you hold the shares in physical form, you must first convert them into demat form by filling up the demat requisition slip (DRS) and only then can the shares be sold. Selling physical delivery of shares is not possible any longer.
To understand when you get delivery of stocks, let us understand the clearing and settlement process in greater detail. You don’t have to get into the nuances of the systems and processes. Suffice to know that clearing and settlement process is the lifeline of the purchase and sale of shares in the stock market. Let us first understand how the clearing and settlement process functions silently to ensure that when you buy stocks it actually hits your demat account on T+2 day.
When do you get delivery of stocks after buying it?
Here we come to the pragmatic application of the clearing and settlement process with a live example of what happens when you actually buy a stock for delivery. Here is the clearing and settlement process flow that you need to be aware of.
- When you buy a stock on T day, the first thing you need to do is to ensure that your trading account is adequately funded to pay the full price of the stock purchase.
- By the close of trading on T day, the broker will debit the purchase value + brokerage + statutory charges to your trading account and it will reflect in your ledger.
- At this stage, you have purchased the stock and you have also paid for it fully, but yet to get demat delivery. That is where the clearing and settlement process begins.
- Your proof of trade is the contract note which is generated and sent electronically to you. It is like a bill and a confirmation by the broker that specified shares have been bought on your behalf at the said price and relevant charges debited.
- On the day after the trade, there are two important aspects of the clearing and settlement process that happen. Firstly, the amounts get debited to your bank account and the broker has to deposit the exchange charges and STT with the exchange.
- Then comes the most important part of the clearing and settlement process, which is the T+2 day. From a clearing and settlement process perspective, this T+2 refers to 2 working days and holidays are excluded.
- On the T+2 day, the actual finalization of the clearing and settlement process starts. The shares are debited to the sellers demat account and credited to the broker account where you placed the buy order.
- Once the broker gets the credit of the shares, the first thing the broker checks is if there are any pending debits in your trading account and if the account is clear then the shares are credited to the demat account of the buyer by the end of T+2 day. This completes the clearing and settlement process for the buyer.
- By the end of T+2 day, the shares will start reflecting in the demat account of the buyer which can be verified online. Effectively, these shares will come into your demat only by late on T+2 so they will be available for trading from T+3 day onwards.
What happens to the clearing and settlement process on the sell side. Just as the buying broker credits the shares to the demat account of the buyer on T+2 day, similarly, the selling broker also credits the funds into the bank account of the seller by the end of T+2 day. The seller can verify with the bank if the funds have come in. This completes the clearing and settlement process for the buyer and the seller.
How to settle your dues?
In the clearing and settlement process, the buyer and the seller of shares only interface with the broker. It is only the broker (trading member) who also interfaces with the clearing member and the clearing corporations to ensure that process goes through smoothly. Any dues of the buyer or seller of shares have to be paid only to the broker.
Normally, brokers may hold back demat credit of shares if there are dues in the trading account like trading loss debits, demat charges etc. In such cases, the client can just pay the pending amount and close the debit and immediately get the credit of shares in the demat account.
How to start delivery trading?
The first step to start delivery trading is to open a trading account with a broker along with a demat account. Once that is opened, the next step is to activate the trading account and change the password so that you are fully ready to start delivery trading. Once the account is set and activated, you can fund the account and start trading for delivery. The process is quite simple and user-friendly.
Frequently Asked Questions Expand All
Trades are cleared by the brokers who also act as trading members / clearing members and they interface with clearing corporations and DPs to clear trades.
Apart from the broker or trading member, there is the clearing member and the clearing corporation as well as DP as part of the clearing and settlement process.
The delivery of securities is normally a smooth process but there are certain risks like auction of securities which could happen in case of under-delivery. BTST can also create risk in delivery.
The clearing and settlement cycle is standardized by the exchange and applies similarly to all the brokers.