Short delivery occurs when the seller fails to deliver shares to the exchange by the T+1 settlement. If shares are not delivered on trade day, the exchange attempts to deliver them via auction. If successful, the delivery of shares is received on T+2 by the buyer. If not successful, the trade will be settled by financial closeout of the transaction, where a cash compensation is paid to the buyer.

In the case of short delivery of MTF purchases, there can be two possible outcomes:

Scenario 1: Payout Received via Auction (T+2)
In the case of MTF purchases, short delivery results in a pledge failure, since the required holdings are not received in the client’s demat account on time. If the delivery/payout of shares is received on T+2 day via auction, then the client can retain MTF funding by immediately completing the MTF pledge process using the link provided by Jainam and OTP authentication. If the client fails to pledge, then the MTF funding will be released.

Scenario 2: Financial Close-Out (No Shares Received)
If the auction fails, the exchange performs a financial close-out of the trade. The client does not receive any shares but instead receives a credit amount as settlement. In such cases, MTF funding will be released, as no shares are available. The amount received from the exchange is first used to recover the MTF funding amount by Jainam. Any remaining amount is credited to the client’s ledger.