YES Bank share traders to face delivery blues

PALAK SHAH March 15 | Updated on March 16, 2020 Published on March 15, 2020

File photo   -  Reuters

Trading and settlement in YES Bank shares are likely to witness heightened chaos on Monday. This is on the back of a government notification which said that under the reconstruction scheme for the bank there will be lock-in period of three years to the extent of 75 per cent in respect of shares held by existing shareholders.

On this basis, depository participants (DPs) issued a circular and said that they had already frozen 75 per cent shares of YES Bank of each of their demat account holders as on March 13. Brokers say those who sold their shares on Thursday and Friday and were planning to issue delivery instructions on Monday are a worried lot as their delivery is now stuck. Also worried are those who have indulged in trading in the bank’s shares in the derivative segment.

Equity futures and options trades are now delivery settled, wherein the counter party can seek delivery of shares. But if 75 per cent of delivery is frozen, there would be scramble in the markets on Monday as those who are short in the counter will try to square-up their position, pushing the share price of the bank higher. Share price will also witness wild swings as supply has been curbed but demand would remain due to pressure to deliver shares, brokers said.

If those who have sold shares cannot deliver on time, their shares go for auction at the market price. If the price is higher then traders who are yet to mark shares for additional delivery will take additional beating. Only shares currently lying in a broker’s pool account can be marked for delivery, the circular from DPs said.

Though trading is in digital those having trading and demat account with separate entities still have to fill a physical slip to issue delivery instruction. Securities law allows the delivery instructions to be given on T+2 basis, which is on two working days.

On March 13, after the markets closed for trading, the government issued a Gazette notification, which announced the three-year lock-in.

“On the basis of request from the company to execute corporate action to give effect to the aforesaid notification, CDSL has activated the new ISIN INE528G01035 for YES Bank equity and executed the corporate action for following: To incorporate lock in for three years on eligible shares of eligible shareholders as per the corporate action request given by the company. The securities lying in the clearing members’ (CMs’) accounts as March 13, 2020 including Early Paying Accounts, Clearing Member Accounts, CM Principal Accounts, CM Pool Accounts, Client Unpaid Securities Account (CUSA) have not been transferred to the new ISIN and no lock in has been incorporated on the same,” a circular from CDSL said.

Simply put, YES Bank shares lying in a brokers’ pool account can only be delivered and the rest are frozen.

Published on March 15, 2020

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