--- title: "What is short delivery and what are its consequences?" description: "Short delivery happens when a seller fails to deliver shares by the settlement date. This can occur in three situations:" category: arrow subcategory: trading-faqs slug: what-is-short-delivery-and-what-are-its-consequences canonical: https://support.arrow.trade/arrow/trading-faqs/what-is-short-delivery-and-what-are-its-consequences/ --- # What is short delivery and what are its consequences? > Short delivery happens when a seller fails to deliver shares by the settlement date. This can occur in three situations: ## Short answer Short delivery happens when a seller fails to deliver shares by the settlement date. This can occur in three situations: You take an intraday short position and cannot close it because the stock hits the upper circuit. You sell shares in a Buy Today, Sell Tomorrow (BTST) transaction before they are credited to your demat account. You hold open futures or in-the-money options at expiry that require physical delivery, but you do not have the necessary shares. The consequences differ depending on whether you are the buyer or the seller. ## For buyers ## How to check if my shares have been short-delivered? You receive email and Arrow notifications when short delivery happens. A short-delivery tag also appears beside the affected stock. On Arrow app: the short-delivered quantity displays for the stock. On Arrow web: Hovering over the tag displays the short-delivered quantity. ## When will I receive shares after short delivery? You will receive your shares on T+2 day. The Clearing Corporation holds a voluntary auction on T+1 day to procure the short-delivered shares. If the Clearing Corporation cannot procure shares in the auction, your Arrow account will be credited with cash based on the close-out price. Example: You purchase shares on Monday (T day), and they appear as T1 holdings until Tuesday (T+1 day) If shares were not delivered on Tuesday (T+1 day), a short delivery tag appears on Wednesday (T+2 day) The exchange delivers shares procured from the auction market held on Tuesday (T+1 day) and delivers them on Wednesday (T+2 day) You can see the shares on Arrow from Thursday (T+3 day) ## For sellers When you fail to deliver shares by the settlement date, the Clearing Corporation (CC) conducts a voluntary auction on T+1 day, usually after 2:30 PM, lasting 30 minutes. Bidding occurs within a price band typically set at ±20% of the previous day's settlement price. iRage blocks a 120% short delivery margin based on the settlement price on T day to cover potential auction costs. iRage reverses this margin once the auction is completed. Example : Monday (T day): You sell 100 shares at ₹800 per share. Tuesday (T+1 day): You do not have the shares in your demat account, causing a short delivery. The exchange holds an auction. The price band is ±20% of Monday's settlement price. If Monday's price was ₹830, the auction range is ₹664 to ₹996. Wednesday (T+2 day): If the exchange buys the shares at ₹920, your account is debited the total cost (auction price and charges). ## Types of shortages and their charges The charges you pay depend on whether the shortage is internal or exchange-based. Internal shortage occurs when both the buyer and seller are clients of the same broker. If you fail to deliver shares, the buyer within iRage does not receive them. Charges: Example: Settlement price = ₹1,000 Quantity = 100 shares Value of security = ₹1,00,000 (₹1,000 × 100) Facilitation fee = ₹1,000 (1% of ₹1,00,000) GST = ₹180 (18% of ₹1,000) Total auction fee = ₹1,180 (Fee + GST) Exchange shortage occurs when the buyer and seller are with different brokers. If you fail to deliver shares to iRage, iRage defaults on the delivery to the Clearing Corporation. Charges: Example: Settlement price = ₹1,000 Quantity = 100 shares Value of security = ₹1,00,000 (₹1,000 × 100) Penalty (0.05%) = ₹50 (0.05% of ₹1,00,000) GST (18%) = ₹9 (18% of ₹50) Total penalty = ₹59 (Penalty + GST) ## Auction price for unsuccessful shortages As per the exchange circular, if the exchange cannot buy all the required shares in an auction, it uses a Weighted Average Price (WAP) for auction settlement. Example scenario: There is a shortage of 1,000 shares. The exchange tries to buy them in an auction, but only finds some: 800 shares are bought at ₹100 (auction price). 200 shares could not be bought, so they are closed out at ₹120 (closeout price). ## How the Weighted Average Price (WAP) is calculated: Instead of charging two different prices, the exchange blends them into one: (800 shares × ₹100) + (200 shares × ₹120) = ₹1,04,000 (total cost) ₹1,04,000 ÷ 1,000 shares = ₹104 per share (WAP) The final settlement: For you (the seller): Your account is debited at a flat rate of ₹104 per share for the entire 1,000 shares (total: ₹1,04,000). For the buyer: They receive the 800 shares that were bought, plus a cash credit of ₹120 per share for the 200 shares that were not available in the auction. If no shares are purchased in the auction, the closeout price (₹120) applies to the full 1,000 shares for both the buyer and the seller. ## The Investor Protection Fund (IPF) If the exchange buys shares in the auction at a lower price than the T-day settlement price, the exchange collects the price difference and transfers it directly to the Investor Protection Fund (IPF). ## Related - Browse more in [trading faqs](/arrow/trading-faqs/) - Open account: [kyc.arrow.trade](https://kyc.arrow.trade) - Trade on Arrow: [app.arrow.trade](https://app.arrow.trade) - Support: [support@arrow.trade](mailto:support@arrow.trade) --- Source: https://support.arrow.trade/arrow/trading-faqs/what-is-short-delivery-and-what-are-its-consequences/ Publisher: Arrow / iRage Broking Services LLP