This is the Part 3 on the series. I hope that you understand the previous 2 parts.
In part 3, I will explain on the process of trading settlement so that it is clear when you should make payment for your buy transaction. I will also explain the risk that you will be facing if you fail to follow the rule.
Part 1 – How to Open Trading and CDS Account for Trading in Bursa Malaysia?
Part 2 – How to Buy and Sell Shares in Bursa Malaysia?
Part 3 – How to Determine Trading Settlement in Bursa Malaysia?
Part 4 – How to Calculate Profit, Loss and Brokerage Fees in Stock Market Trading?
Step 1 – Understand Settlement Date
In Bursa Malaysia, all buy or sell order have to be settled at 12.30pm on day T+3 where T is the day of transaction.
Basically, what it means is that you have to pay your purchase or deliver you sell transaction on the third day following the transaction day. However, weekend and public holiday are not counted.
If you buy shares, and fail to pay at T+3, your broker have the right to sell unpaid shares at T+4 morning at any price. We call this force selling.
If you sell shares, and you do not have the shares in your CDS account at midnight of T+2, Bursa will impose ‘Buy-in’ to your account.
‘Buy-in’ is a penalty where you have to buy back the all shares that you sold from the open market 10 bits or ticks higher than the last closing price.
Step 2 – Trading Settlement
If you buy shares, then you have to pay before T+3, 12.30pm. Normally, broker will set off automatically from funds that are available in your trust account. If the fund is insufficient then you have to deposit additional cash into yout trust account.
Buying settlement are calculated as follow
Total Buy Settlement (RM) = Value of Shares + Brokerage Fees + Clearing Fees + Stamp Duty
Shares that you purchase will be credited to your CDS account at T+3.
If you sell shares, make sure that you own the shares in the particular before that. You are allowed to transfer shares from other CDS account by T+2 to avoid Buy-In.
Selling settlement are calculated as follow
Total Sell Settlement (RM) = Value of Shares – Brokerage Fees – Clearing Fees – Stamp Duty
Cash from sell proceed will be credited to your trust account at T+3.