Trading in simple terms means buying and selling shares. However, there are some jargon terms under the various trade categories, which may be difficult or challenging for the investors to understand, especially the beginners. Sometimes, you may have come across the news that the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) has decided to shift some shares in the Trade to Trade segment. So, now the question pops out here is what is Trade to Trade segment and how it is different from intraday trading? Let’s get started.
What is Trade to Trade Settlement in BSE and NSE?
Trade to Trade settlement, also known as T2T and T segment is essentially a segment of the BSE and NSE where carrying out intraday trading is strictly prohibited by the stock exchanges, which means that you cannot purchase or sell the shares on the same day as you can do in other stocks. The stocks that come under the T2T segment can only be compulsorily traded (buy or sell) on the delivery basis. It means that if a particular stock has been purchased today, then it can only be sold after the T+2 settlement. If you try to sell the shares on the same day, then your order will be rejected. Some of the prominent points to remember while trading in the T2T segment are as follows:
- If the shares have been purchased, then delivery has to be taken necessarily by paying the full amount.
- If you are selling the shares, then you will only get the money from the buyer after the delivery of shares.
- If you do not have any delivery for selling, then you will be required to pay a hefty penalty. Furthermore, you can buy the share from the auction market and make the delivery.
Criteria for Moving or Shifting Shares to T2T Segment
The criteria for shifting the shares to the trade to trade segment are decided by the stock exchanges along with the Securities and Exchange Board of India (SEBI). The rules for moving the stocks are listed on the websites of BSE and NSE, which are reviewed on the regular basis. One of the most important criteria’s is that on the date of review, the shares must be within the 5% price filter band, which is also known as the circuit filter for the minimum of 22 days. A circuit filter is basically a price band which is levied by the SEBI to curb the excessive movement of the share prices. This is done in order to control the manipulation of the stock prices by the operators and guard the interest of the investors. If the prices of the shares break the pre-defined price band, then the trading in that particular stock is suspended.
Is it Profitable to Invest in Shares in Trade to Trade Segment or Stay Away?
The concept of T2T segment has been introduced to keep a tab on those shares, where excessive speculation has been going on. From the above discussion, it is clear that the trading volume, especially in this kind of segment is a delivery volume. If the delivery volume is on the higher side, then it is altogether good news because it signifies that a large percentage of people are interested to buy and hold the shares.
Moreover, if you decide to invest in shares in trade to trade segment, then one of the benefits you gain that you remain protected from the speculators and excessive price movement.