When does cash settlement occur for short delivery, and how is it calculated?

Cash settlement occurs when the exchange is unable to buy shares through the auction to cover a short delivery. In such cases, the amount is credited to your trading account, typically on T+2. This is relatively uncommon in liquid stocks but can occur more frequently in illiquid stocks. 

The closeout amount generally depends on the security type:

• Most stocks: Higher of the auction-day settlement price + 20% or the highest traded price from T day to the auction date.
• Trade-for-Trade (T2T) securities: Higher of the highest price on T day across exchanges or T-day settlement price + 20%.
• Corporate action securities: Higher of the auction-day settlement price + 10% or the highest traded price during the applicable period.
• Bonds: The applicable closeout percentage depends on the bond's credit rating.
• Partial auction delivery: If only part of the required quantity is bought in the auction, the exchange determines the settlement using a Weighted Average Price (WAP).