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FAQs on Rights Entitlement Trading


A right is issued by a company to its shareholders on a pre-determined date called the record date. Rights entitlements are offered to shareholders as a ratio to the number of securities held on this record date. A shareholder may refuse to subscribe to the rights issue and just let the 'right' lapse. Alternatively, the shareholder can renounce/trade the entitlement in favour of another person for a price. 

You can trade Right entitlement on the NSE Equity market trading platform. Settlement guarantee shall be provided for trades and settlement shall be compulsorily done in dematerialised mode.

Rights Entitlements (REs) which are neither subscribed nor renounced on or before the Issue Closing Date are lapsed post closure of the issue and the ISINs linked to these REs shall stand suspended.

Yes. However, they need to purchase Rights Entitlement and then subscribe to the Rights issue before the close of the issue.

 

Trading

Details of different parameters as mentioned below-

  • Market Type- Normal
  • Book Type- Regular Lot (RL), Stop Loss (SL)
  • Series available for trading- BE & BL
  • Lot size- 1 share
  • Order Type- Day, Immediate or Cancel (IOC), Market & Limit Order
  • Price steps- As per parent stock’s steps
  • Price band- +/- 40%

Rights entitlement would be traded on the Equity market segment of NSE.

The Exchange shall intimate the market pre trading date.

Rights entitlement can be traded on the pre-open market, normal market (EQ), block window (BL) and post close market.

On the first day of the Right Entitlement, the base price would be calculated as (Closing Price of the stock - Right Entitlement price). On every subsequent days the Closing price of the Right Entitlement trading would be the base price.

 

Clearing & Settlement

All clearing members in CM segment shall be eligible for clearing and settlement of Rights Entitlement. Trades executed shall be settled on T+2 basis. Trades executed shall be cleared and settled on gross basis and funds shall be settled in net basis.

Applicable margin shall be 100% of Rights Entitlement.

Transactions executed in series ‘BE’ shall be settled under settlement type ‘W’ and transactions executed in series ‘BL’ shall be settled under settlement type ‘N’. Transactions shall be cleared and settled on a trade for trade basis and there shall be no netting of transactions

Any shortages in Rights Entitlement shall be directly closed-out at the highest price of Rights Entitlement prevailing across the Exchanges from the day of trading till the T+1 day or 20% above the settlement price of Rights Entitlement on the T+1 day, whichever is higher

 

Finance & Accounts

The transaction charges for Rights entitlement is aligned to NSE Cash market transaction charges.

Trading in dematerialised Rights entitlements on the Exchange shall be chargeable to STT at the rate specified in the entry at serial no. 4(a) of the STT Table below Section 98 of the Finance (No.2) Act, 2004 in respect of "Sale of an option in securities". Accordingly, STT shall be payable by the seller at the rate of 0.05% of the value at which such Rights entitlements are traded.

Updated on: 29/09/2020
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