Cash settlement usually occurs on T+2 day if the exchange is unable to secure the shares during the auction process. The likelihood of cash settlement is lower for liquid stocks and higher for illiquid ones.

Note: The settlement price, known as the close-out price, is generally set at 20% above the stock's closing price on the auction day. Once the funds are credited to your trading account, you can use this amount to repurchase the shares.

Example Scenario:

1. 100 shares of Yes Bank are bought at ₹15 per share, but the shares are short delivered.
2. The exchange attempts to find sellers in the auction market to deliver the 100 shares to the buyer's demat account.
3. If no sellers are found, the trade is settled in cash.
4. If the closing price of Yes Bank on the auction date is ₹18, the exchange settles the trade at ₹21.6 (20% above ₹18).
5. The defaulting seller pays ₹2160 (₹21.6 x 100 shares), and this amount is credited to the buyer's account.
6. If Yes Bank's price reaches ₹25 between the trading day and the auction day, the cash settlement is done at ₹25 instead of ₹21.6.

This is because cash settlement is always based on whichever is higher of the following:

• The closing price on auction day plus 20%.
• The highest price of the stock from the trading day until the auction date.