T + 2

When we buy stocks, the process followed by stock exchanges is T+2 , that is , suppose I buy a certain stock on a Wednesday , then Wednesday would be "T" or "Day of the Transaction" and the stock exchange would take 2 more days to square the transaction , that is on Friday , I should see my demat account credited with the stock and cash debited out of my trading account .This T+2 th day is called "Settlement day"

This would be the situation when both the buyer and seller have acted in good faith .

What would happen , suppose the seller , sells 10 shares of a certain company , when he has only 5 shares with him ?

In this situtation, on T+2th day( i.e on Friday) the stock exchange realises that there has been a short fall, this situation is called "Short Deliveries" . Now to set right this situation, stock exchange would debit the money account of the broker who is unable to deliver the promised quantity of shares an amount equal to the short fall.

The stock exchange then conducts a auction for the required shares , various brokers can take part in this auction and the stock exchange finally buys the required shortfall of shares and delivers it to the buyer . If the price paid by exchange in the auction is higher then the debited amount , then the defaulted seller would have to shell out the difference too.

In situation like these the transaction ceases to be a T+2 and ends up being a T+5 , since the stock exchange would take 3 more days to set right the wrong .

To arrive at the settlement day all holidays are excluded.

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