{"id":12174,"date":"2026-05-22T13:38:20","date_gmt":"2026-05-22T13:38:20","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/glossary\/auction-session\/"},"modified":"2026-05-22T13:38:20","modified_gmt":"2026-05-22T13:38:20","slug":"auction-session","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/auction-session\/","title":{"rendered":"Auction Session"},"content":{"rendered":"<p>When a seller fails to deliver <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/shares\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">shares<\/a> on the settlement day, the exchange does not leave the buyer empty-handed. It runs a special window called the <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/auction-session\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">auction session<\/a> &#x2014; usually between 2:00 p.m. and 2:45 p.m. on the settlement day &#x2014; to source those undelivered shares from other market participants at a special auction price. This system keeps the market&#x2019;s settlement promise intact, but it can hurt the defaulting seller.<\/p>\n<div><strong>Key takeaways:<\/strong>\n<ul>\n<li>The auction session is the exchange&#x2019;s safety net for short-delivery trades.<\/li>\n<li>It runs separately from regular <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/trading\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">trading<\/a>, with its own price band and rules.<\/li>\n<li>Defaulting sellers pay the auction price &#x2014; often higher than the closing price &#x2014; plus a penalty.<\/li>\n<li>Buyers are protected: they always receive their shares from the auction proceeds.<\/li>\n<li>Auction risk is most relevant in BTST and <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/short-selling\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">short selling<\/a>, especially in illiquid <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/stocks\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">stocks<\/a>.<\/li>\n<\/ul>\n<\/div>\n<h2 id=\"why-auctions-are-needed\">Why auctions are needed<\/h2>\n<p>Indian markets work on a settlement guarantee. When you buy 100 shares, the exchange promises you will receive them, even if the seller defaults. If a seller fails to deliver on T+1, the clearing corporation must source the shares from elsewhere. The auction session is that mechanism &#x2014; a controlled exchange window where market participants can offer the missing shares for a fair price.<\/p>\n<h2 id=\"when-the-auction-happens\">When the auction happens<\/h2>\n<p>For cash <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/equity\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">equity<\/a>, the auction window typically runs from 2:00 p.m. to 2:45 p.m. on T+1, the day after the original trade. The auction price is allowed to move up to 20% from the previous day&#x2019;s close &#x2014; a wide band that protects the buyer but exposes the defaulting seller to potentially heavy losses.<\/p>\n<h2 id=\"how-the-auction-is-settled\">How the auction is settled<\/h2>\n<ol>\n<li>The clearing corporation flags the short-delivery quantity by 11 a.m. on T+1.<\/li>\n<li>An auction notice goes to all eligible members, who can submit offers in the auction window.<\/li>\n<li>The exchange picks the lowest offer (best price for the buyer&#x2019;s benefit) within the 20% band.<\/li>\n<li>The auction price is d<a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/ebit\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>ebit<\/a>ed from the defaulting seller&rsquo;s ledger, plus a small penalty (usually 0.05% or higher).<\/li>\n<li>If no shares are offered, the trade is closed out at the higher of the previous close or 20% above it, and the difference is paid to the buyer.<\/li>\n<\/ol>\n<h2 id=\"what-auctions-mean-for-you\">What auctions mean for you<\/h2>\n<ul>\n<li><strong>For buyers:<\/strong> Almost zero impact. You receive your shares or equivalent cash via close-out.<\/li>\n<li><strong>For sellers:<\/strong> Avoid short delivery at all costs. Auction prices can be 5&#x2013;20% above market.<\/li>\n<li><strong>For BTST traders:<\/strong> The risk is real if the original seller defaults. Sticking to highly liquid scrips minimises this risk.<\/li>\n<\/ul>\n<h2 id=\"common-reasons-for-short-delivery\">Common reasons for short delivery<\/h2>\n<ul>\n<li>Seller did not have the shares in demat at the time of settlement (BTST gone wrong, <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/broker\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">broker<\/a> glitches).<\/li>\n<li>Short selling without proper SLB borrowing arrangement.<\/li>\n<li>Operational errors at the broker&#x2019;s end.<\/li>\n<li>Off-market transfers that did not credit in time.<\/li>\n<\/ul>\n<h2 id=\"avoiding-auction-trouble\">Avoiding auction trouble<\/h2>\n<p>The simplest defences are to stick with liquid large-caps for short-term trades, to keep enough shares in demat before placing sell orders, and to use BTST only when you understand the auction risk. Many brokers offer settings to block sell orders on stocks not in demat to prevent accidental short delivery.<\/p>\n<h2 id=\"frequently-asked-questions\">Frequently asked questions<\/h2>\n<div>\n<h3 id=\"will-i-lose-money-if-my-counterparty-defaults\">Will I lose money if my counterparty defaults?<\/h3>\n<p>No. The exchange guarantees delivery to you. The defaulting seller bears the cost.<\/p>\n<h3 id=\"can-i-participate-in-the-auction-session-as-a-retail-trader\">Can I participate in the auction session as a retail trader?<\/h3>\n<p>Indirectly. Brokers may allow you to submit auction quotes, but most retail traders never use it.<\/p>\n<h3 id=\"is-the-auction-process-the-same-across-nse-and-bse\">Is the auction process the same across <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/nse\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>NSE<\/a> and <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/bse\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>BSE<\/a>?<\/h3>\n<p>Yes, with minor differences in timing and circulars. The principle of replacing missing shares is identical.<\/p>\n<h3 id=\"how-is-the-auction-penalty-calculated\">How is the auction penalty calculated?<\/h3>\n<p>Typically the auction price plus a percentage levied by the exchange &#x2014; together they can be significantly above the regular market price.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>When a seller fails to deliver shares on the settlement day, the exchange does not leave the buyer empty-handed. It runs a special window called the auction session &#x2014; usually between 2:00 p.m. and 2:45 p.m. on the settlement day &#x2014; to source those undelivered shares from other market participants at a special auction price. [&#x2026;]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"_uag_custom_page_level_css":"","footnotes":""},"class_list":["post-12174","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"web-stories-poster-portrait":false,"web-stories-publisher-logo":false,"web-stories-thumbnail":false},"uagb_author_info":{"display_name":"Team Lemonn","author_link":"https:\/\/lemonn.co.in\/blog\/author\/ashu\/"},"uagb_comment_info":0,"uagb_excerpt":"When a seller fails to deliver shares on the settlement day, the exchange does not leave the buyer empty-handed. It runs a special window called the auction session &#x2014; usually between 2:00 p.m. and 2:45 p.m. on the settlement day &#x2014; to source those undelivered shares from other market participants at a special auction price.&hellip;","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/12174","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/12174\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=12174"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}