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Understanding market and off market transactions for credit and debit of shares

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Published: Tuesday, June 26, 2012, 12:28 [IST]

Understanding market and off market transactions of shares

There are two types of transaction involving debit or credit of shares. Here we explain the two methods.

On market transaction:

Any transaction for sale and purchase of securities through a broker on the stock exchange to be settled through Clearing Corporation/Clearing House is generally termed as on market transaction.

Off market transaction:

Off Market transaction is one which is settled directly between two BOs with or without using the broker and where no clearing corporation/clearing house is involved.

How deals happen in Off Market?

In off market, the selling client will have to give a delivery instruction to his DP to transfer securities from his depository account to the buying client's depository account.

To receive securities from the selling client's depository account, the buying client must give a receipt instruction if he has not already given a standing receipt instruction to his DP.

The details in the "delivery" and "receipt" instructions must match else the transfer will not take place. The transfer will take place on the "execution date" indicated in the instructions. If the buying client has given a standing receipt instruction, this may be ignored.

Precautions:

  • For a transfer of securities to be effected from one account to another, details mentioned in the "delivery" and "receipt" instructions need to match. 
  • Investors need to be especially careful with respect to the "execution date" mentioned in the two forms. 
  • The transfer would be rejected if there is a mismatch in this regard even if all other details in the two forms match.

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Topics: shares, demat
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