Trade To Trade Settlement Of Shares on NSE & BSE
Trade to Trade settlement is a segment where shares can be traded only for delivery. It means Trade to Trade shares can not be traded on intraday basis. Each share purchased / sold which are part of this segment need to be taken delivery by paying full amount. In rolling settlement (T+2 Settlement), trades of each stock is netted at broker level and broker needs to pay funds or transfer securities on Net basis. Stocks are included in T2T segment as a part of surveillance measure.
Selection criteria will be similar both on NSE and BSE for inclusion of scrips in Trade to Trade Segment. Even if selection criteria is matched in only one exchange(For Stocks traded on both exchanges), they will be included in T2T Segment. For Example see the list of T2T stocks which will be effective from 11 Oct 2013. It can be noticed that * indicates scrips satisfying all the criteria only at BSE and ** indicates scrips satisfying all the criteria only at NSE (of the scrips commonly traded on both BSE and NSE). Circuit filter of the stocks traded on Trade for Trade (T2T) Segment is 5%.
BSE T2T Segment Scrip List inclusion wef 11 Oct 2013
List of Stocks included in Trade for Trade Segment in NSE wef 11 Oct 13
* here denotes stocks satisfied all the criteria at BSE only
To understand further the concept of rolling settlement and Trade to Trade (T2T) segment, consider the example.
For normal rolling settlement, one can trade stocks intraday (One can buy and sell a security on the same day). If Investor A purchases 100 shares at 500 rupees at 09:30 AM and sold these 100 shares later in the day at 505 rupees, he can make a profit of 500 rupees (Of course, brokerage and taxes should be excluded). Even one can short sell a security and buy later on intra day basis. But for securities which are part of Trade-for-trade segment, each trade will result in delivery. Trades will not be netted. Securities in T2T segment are denoted by BE in National Stock Exchange of India and T in Bombay Stock Exchange of India. Further all stocks which are part of Z Segment are compulsorily settled by delivery. Brokers need to collect 100 % Var (Value at Risk) margin from the clients trading in Trade-to-Trade segment Stocks.
Both NSE and BSE monitor and decide about inclusion of securities in T2T category fortnightly and Quarterly. Some of the conditions that are considered in the selection are market capitalization, price earnings ratio, price variation vis-à-vis the market movement, volatility, volume variation, client concentration and number of non promoter shareholders etc.,
Also one should note that transfer of security for trading and settlement on a trade-to- trade basis is purely on account of market surveillance and it should not be construed as an adverse action against the concerned company.
To understand how securities are selected to include in Trade-to-Trade segment, consider the criteria followed by BSE during their fortnightly review. Please note that following 3 conditions (a+b+c) must be fulfilled to include a stock in T2T segment during its fortnighly review.
a) Market capitalization of the security : Securities with a market capitalization of 500 crores or less as per last Quarterly Review.
b) price earnings ratio (P/E Ratio):
|Sensex PE (Price Earning Ratio)|
|Between 15-20||Scrips having PE greater than 30 will be considered|
|PE is greater than 20||Higher than 20 is rounded off to nearest number and add to 30. For example if PE of sensex is 25 then Scrips with PE of 35 (30+5) are considered|
|PE is less than 15||Value is rounded off to nearest number and subtracted from 30. For example if PE of sensex is 10, then stocks with PE of 25 (30-5) are considered|
|However, minimum PE should be 25 to be considered to include in Trade for Trade Category. If PE is less than 25, then such stocks will not be considered.|
c) Price variation vis-à-vis the market movement: All scrips where the price variation is in positive direction as below will be considered. 20% plus Sensex variation (Variation of Sensex will be calculated on close to close basis). In case, SENSEX variation is negative it shall be 20% minus SENSEX variation as Price Variation Benchmark, subject to a minimum of 10%.
Scrips which are part of the F&O (Derivatives) segment are not considered to be included in Trade-for-Trade segment. Further exchanges in consultation with SEBI, decide the scrips to be included in this segment. These inclusions will be notified 17 days prior to the date of T2T induction (Includes Satuarday, Sunday and other holidays).
Additionally, SEBI has vide circular bearing no SEBI/Cir/ISD/1/2010 dated Sep 02 2010 laid down further guidelines for shifting of a security to trade for trade segment.
Further, read about quarterly review criteria for selection of stocks in T2T Segment. Out of the following four categories, if ANY ONE Criteria is fulfilled, then the stock is moved to T2T.