Selling before T + 2 is complete (2024)

FAQs

What happens if you sell before T 2? ›

If you purchased the shares with settled funds, you are free to sell at any time. If you bought the shares with unsettled funds, you cannot sell them until the funds have settled. Selling shares before the funds used to purchase them settle results in a violation of settlement regulations.

If you buy a security that's not marginable then settled funds are required for full payment. Consequently, a settlement violation can occur in a margin account if you buy and then sell a non-marginable security before settled funds have covered the purchase.

Newly listed stocks are traded under T2T for first 10 days from listing date. These shares will show in your demat account only after 2-3 days. T2T stocks are placed in a separate group/series - BE Series on the NSE and T Group on the BSE. Institutions usually do not hold T2T stocks.

This settlement cycle is known as "T+2," shorthand for "trade date plus two days." T+2 means that when you buy a security, your payment must be received by your brokerage firm no later than two business days after the trade is executed.

Indian markets currently operate on a T+2 rolling system. That means if you buy or sell a stock in the morning and do not square off before the end of trade on the same day, then it compulsorily goes into delivery.

If a stock is purchased it can only be sold after the T+2 settlement happens. If you try selling the shares the same day, or before the shares are in your DEMAT account, your order will be rejected .

A good faith violation occurs when you buy a security and sell it before paying for the initial purchase in full with settled funds. Only cash or the sales proceeds of fully paid for securities qualify as “settled funds.”

Selling off the plan before settlement often requires obtaining the developer's consent. It is important to note that developers may have specific policies in place regarding pre-settlement sales. Seek legal advice to ensure you comply with the contractual requirements and obtain the necessary permissions.

A good faith violation occurs when you sell a security, use those unsettled funds to buy another security, and then sell that security before the first sale settles.

Unlike the EQ series stocks, the BE series T2T stocks are not available for intraday square off. This means that if you buy T2T stocks, you have to necessarily take delivery on the T+2 date. If you sell the T2T stock, you must have the stock in your demat account, and therefore, be able to give delivery on T+2 date.

Can a stock come out of T2T and be put in normal trade again? ›

Remember, just as companies can be shifted to the T2T segment, companies can also be shifted back from the T2T segment to the normal segment. This is part of the quarterly assessment review done by the exchange along with the regulator. What happens to a stock when it is shifted to the T2T segment?

It is a segment where stocks can only be traded on a delivery basis. This means that when you buy T2T stocks, you are required to pay the full amount for the stock, and intraday trading or BTST (Buy Today, Sell Tomorrow) trades are not allowed. T2T stocks are often considered speculative and can carry higher risks.

The Change to T+1

When you sell a security, you must deliver your security to the brokerage firm no later than two business days after the sale. For example, if you sold shares of a stock on Tuesday, the transaction would settle on Thursday.

On February 15, 2023, the Securities and Exchange Commission (the "Commission") adopted a rule amendment to shorten the standard settlement cycle for most routine securities trades from two business days after the trade date to one business day after the trade date (or from "T+2" to "T+1" in common parlance).

Currently, the vast majority of mutual funds traded in the US are settled T+1. However, the other main asset classes used by retail investors, equities and ETFs, settle T+3.

When you buy a share, the same will be reflected in your DEMAT account by the end of T+1 day. All equity/stock settlements in India happen on a T+1 basis. When you sell shares, the shares are blocked immediately, and the sale proceeds are credited again on T+1 day.

With some investments, you can reinvest proceeds to avoid capital gains, but for stock owned in regular taxable accounts, no such provision applies, and you'll pay capital gains taxes according to how long you held your investment.

If the treasury stock is resold later, the cash account is increased through a debit while the treasury stock account is decreased. This increases total shareholders' equity through a credit notation on the balance sheet.

You will be levied additional penalty also. If you do so, your short position will be then auctioned by the respective exchange and will be bought at whatever the price the script is on T+2 day with some penalty, usually heavy on your pocket. This is only applicable for shares (cash segment).