The share market is full of speculation. The Securities and Exchange Board of India (SEBI) is the governing body that regulates the stock market. It looks after the interest of the traders and investors. Traders and investors often suffer a good amount of loss due to speculation activities in the stock market.
To protect the interest of the shareholders, the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), after consulting the SEBI, moved the stocks to the “Trade-to-Trade” or “T2T” or “T” segment.
What is the meaning of trade to trade?
Trade to Trade is a segment of shares in which intraday trading of shares is prohibited. The investor can purchase the shares only on a delivery basis. While purchasing the shares, the trader/investor must pay the full amount for the shares he purchased. Similarly, he cannot sell the shares until he receives the delivery in his demat account. On receiving the delivery, he can sell the shares. So the script settlement is done on Trade to Trade basis, and netting off is not allowed for the day. In simple words, Trade to Trade does not allow trading intraday.
T2T stocks or Trade to Trade stock means stocks must be delivered to be traded (T+2 settlement). This implies that such equities cannot be traded intraday or, in the case of Buy Today Sell Tomorrow, daily. If you acquire Trade 2 Trade stocks today, you won’t be able to sell them until the T+2 settlement takes place. Your order will be refused if you try to sell these shares the same day or before they are in the Demat account.
Stocks that are very volatile or have irregular price movements are monitored by exchanges cooperating with the market regulator, SEBI. They put stocks in the T2T section to shield regular investors from being caught up in the volatility and limit unwarranted speculation on such equities.
On a biweekly basis, exchanges relocate stocks to the Trade to Trade sector, shifting in and out of the segment depending on quarterly evaluations.
A mix of, but not limited to, price-to-earnings overvaluation, price fluctuation, and market capitalization are some primary factors utilized to convert stock to the T2T sector. Also evaluated for transfer to the T2T sector are stocks that are not available for trade in the F&O section.
Exchanges classify scrips into several series depending on the kind of instrument and settlement. The Trade 2 Trade stocks are classified as a separate series. The NSE and BSE websites include a list of these stocks.
How to identify T2T stocks?
Exchanges devise T2T in consultation with SEBI to avoid unwanted occurrences. It’s a step to protect the interest of traders/investors.
T2T means only delivery-based settlement. You buy stock by paying for that trade.
In case one buys and sells the stock on the same day (intraday), then Exchange will treat those transactions as different trades altogether :
- Stock bought – will become a part of delivery.
- The stock sold – This means it will be settled by auction as you broke the fundamental rule of Trade To Trade, which does not allow you to sell a stock you don’t hold in delivery. It’s a costly affair.
In short, before initiating any intraday transaction, check the category.
Conclusion
Although the T2T section is difficult, it has its benefits. By trading in the T2T segment, the investor can be safeguarded from price fluctuations and total speculations.
So, if you’re thinking about buying T2T stock, don’t forget to Open Demat Account with Thrilling Securities.
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