The auction
market.
What happens when a seller fails to deliver shares — how the exchange settles it, who pays, and how you can participate.
Work out the auction bill on your own trade.
You sold shares you could not deliver. The exchange buys them in an auction and sends you the difference, plus a penalty. Move the four figures to your trade.
Auction band ₹512 – ₹768, about ±20% of the close.
| Price difference | (₹700 − ₹600) × 150 | ₹15,000.00 |
|---|---|---|
| Valuation debit | ₹640 × 150 | ₹96,000.00 |
| Penalty at 0.05% | 0.05% of ₹96,000 | ₹48.00 |
| GST at 18% | 18% of ₹48.00 | ₹8.64 |
| Total payable | Difference + penalty + GST | ₹15,056.64 |
An estimate on the exchange rates published at the time of writing — 0.05% of the valuation debit plus 18% GST, inside a band of roughly ±20%. The exchange sets these and can change them, and the valuation debit is struck on the close it publishes for the day. Your contract note is the record. There is no separate brokerage on an auction trade.
Why an auction happens
If a seller fails to deliver shares on time, the clearing corporation steps in and conducts an auction, usually on T+1 — the settlement day itself — to source the shares the buyer is owed. The exchange invites eligible participants to sell the required quantity, and matches the bids.
Auctions run inside a defined price band, typically up to ±20% of the reference price. If a stock closed at ₹100, the band would run roughly ₹80 to ₹120.
Points worth knowing
Selling into an auction does not stop you buying the same stock in the regular market on the same day. It is treated as a new trade on a separate settlement cycle, provided you have the margin.
The auction market does not run when the settlement calendar is closed.
Labdhi does not permit selling pledged stock into the auction market, because of the risk of short delivery.
There is no extra brokerage — auction orders are treated as regular equity trades. But if you sell the same stock in both the regular and the auction market, DP charges may apply on each, since they are separate settlements.
Understand Auction properly.
How it works, the types, both sides and the comparisons — for when you want the full picture.
How it resolves
Shares are bought and delivered to the original buyer. The defaulting seller pays the higher auction price, and penalties apply.
If shares cannot be sourced, the trade is settled in cash. The buyer receives compensation and the seller bears the cost, under exchange rules.
Who can sell into an auction
Restricted deliberately, so that whoever offers shares can actually deliver them.
Only shares that have completed settlement and sit free in your demat can be offered.
Shares bought yesterday and not yet settled cannot be sold into an auction.
You are not selling to another investor. The exchange is the counterparty on every auction trade.
A worked example
A seller sells 150 shares on Tuesday (T) at ₹600. The stock hits its upper circuit, no sellers are available, and delivery fails. The exchange auctions on Wednesday (T+1); the previous close was ₹640, so the band is ₹512–₹768. The auction fills at ₹700.
| Component | Working | Amount |
|---|---|---|
| Price difference | (₹700 − ₹600) × 150 | ₹15,000 |
| Valuation debit | ₹640 × 150 | ₹96,000 |
| Penalty at 0.05% | 0.05% of ₹96,000 | ₹48 |
| GST at 18% | 18% of ₹48 | ₹8.64 |
| Total penalty | ₹48 + ₹8.64 | ₹56.64 |
| Total payable | ₹15,000 + ₹56.64 | ₹15,056.64 |
Illustrative, using the figures published on our previous site. Actual penalties depend on the exchange’s rates on the day.
Auction, answered.
No. Auction orders are treated the same as regular equity trades. DP charges may apply twice if you sell the same stock in both the regular and auction markets, as they are separate settlements.
Under T+1 settlement the exchange usually runs the auction on the settlement day itself, and the auctioned shares settle the next day. If no one offers the shares, the trade is closed out at a price set by the exchange.
Short delivery, explained.
If you have been charged for an auction and want to understand the number, call the desk.