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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » DVP is unfair?

DVP is unfair?

+2
SECsux
Kaish86
6 posters

Go down  Message [Page 1 of 1]

1DVP is unfair? Empty DVP is unfair? Wed Jun 23, 2021 1:05 pm

Kaish86


Manager - Equity Analytics
Manager - Equity Analytics
If i sell something at profit, and on 3rd day during settlement if the share price is not favouring buyer's earlier decision and he refuses to settle, will the original trade is cancelled. Can't seller get his money for his original decision. This is unfair. 

As per Current system either buyer pay or not, seller is guaranteed of cash, since broker has to pay on his own account. Is DVP is simply transferring settlement risk of the broker to the seller. 

 Can anyone explain on my 1st paragraph

2DVP is unfair? Empty Re: DVP is unfair? Wed Jun 23, 2021 3:06 pm

SECsux


Manager - Equity Analytics
Manager - Equity Analytics
Very Happy Very Happy Very Happy

3DVP is unfair? Empty Re: DVP is unfair? Wed Jun 23, 2021 3:14 pm

xhunter

xhunter
Moderator
Moderator
@Kaish86 wrote:If i sell something at profit, and on 3rd day during settlement if the share price is not favouring buyer's earlier decision and he refuses to settle, will the original trade is cancelled. Can't seller get his money for his original decision. This is unfair. 

As per Current system either buyer pay or not, seller is guaranteed of cash, since broker has to pay on his own account. Is DVP is simply transferring settlement risk of the broker to the seller. 

 Can anyone explain on my 1st paragraph
first of all can you buy something saying i will settle it on T+3. No, right?  
you should have cash balance or credit or margin facility. so you don't have option. broker will settle it. then if it is on broker credit, broker will take care it with you.

reyaz and samaritan like this post

4DVP is unfair? Empty Re: DVP is unfair? Wed Jun 23, 2021 3:56 pm

Mr. X

Mr. X
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Kaish86 wrote:If i sell something at profit, and on 3rd day during settlement if the share price is not favouring buyer's earlier decision and he refuses to settle, will the original trade is cancelled. Can't seller get his money for his original decision. This is unfair. 

As per Current system either buyer pay or not, seller is guaranteed of cash, since broker has to pay on his own account. Is DVP is simply transferring settlement risk of the broker to the seller. 

 Can anyone explain on my 1st paragraph


Broker part will not change... we cant go negotiate with another investor to buy and default payment... broker will handle it with cash or credit based on the buying power..

you wont see any difference to the current practice... except some wordings.. as pending buy and pending sell till T+3.

5DVP is unfair? Empty Re: DVP is unfair? Wed Jun 23, 2021 6:54 pm

niru


Manager - Equity Analytics
Manager - Equity Analytics
Trade can be cancelled.

No security movement from seller's account.

But, Seller will be compensated for the 3 day price loss and opportunity loss.

CDS will charge this compensation from buy broker, buy broker may charge it from buyer.

Compensation amount = qty x Max(0,P) + 0.8% of transaction value

P = sale price - highest trade price between trade date settlement date

6DVP is unfair? Empty Re: DVP is unfair? Wed Jun 23, 2021 10:20 pm

xhunter

xhunter
Moderator
Moderator
@niru wrote:
Compensation amount = qty x Max(0,P) + 0.8% of transaction value

P = sale price - highest trade price between trade date settlement date
definitely something is wrong.

7DVP is unfair? Empty Re: DVP is unfair? Thu Jun 24, 2021 10:59 am

niru


Manager - Equity Analytics
Manager - Equity Analytics
@niru wrote:Trade can be cancelled.

No security movement from seller's account.

But, Seller will be compensated for the 3 day price loss and opportunity loss.

CDS will charge this compensation from buy broker, buy broker may charge it from buyer.

Compensation amount = qty x Max(0,P) + 0.8% of transaction value

P = sale price - highest trade price between trade date settlement date

Sorry, P should be as follows 

P = sale price - Lowest trade price between trade date settlement date

8DVP is unfair? Empty Re: DVP is unfair? Thu Jun 24, 2021 1:25 pm

samaritan


Moderator
Moderator
@niru wrote:
@niru wrote:Trade can be cancelled.

No security movement from seller's account.

But, Seller will be compensated for the 3 day price loss and opportunity loss.

CDS will charge this compensation from buy broker, buy broker may charge it from buyer.

Compensation amount = qty x Max(0,P) + 0.8% of transaction value

P = sale price - highest trade price between trade date settlement date

Sorry, P should be as follows 

P = sale price - Lowest trade price between trade date settlement date
All in all the DVP adopted by established stock markets globally  provides safety features covering buyers and sellers interests which is nonexistent at the CSE at present. 


Generally people fear and resent changes based on uncertainties & doubts. Appreciate the thoughtful moves by the CSE to create awareness and clear doubts of investors over a period of one month prior to implementing same commencing on 26th July 2021. 


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