Stock markets work in a fast-paced environment and are pretty volatile. Numerous factors can impact the share market movements and investors’ sentiment during the day, reflected in the fluctuating stock prices. The investor’s decision to purchase or sell a stock also changes depending upon the changing market trends and relevant news-flows. It is here when an option to cancel the shares works to their benefit. This article delves into everything you need to know about the cancellation of shares meaning and the procedure for cancellation of shares.
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Cancellation of shares is the ability of the investor to cancel any order of buying or selling securities that have not been executed yet. The orders take a certain time to complete depending upon the selected price, asset liquidity, or other conditions set by the investors. Such orders are marked “pending” on the broker’s stock trading platforms. Investors can cancel these pending orders if their investment decision has changed.
Step By Step Guide On How a Cancelled Order Works
Now that we have understood what cancellation of shares means, let us know how a canceled order works. An order to buy or sell a stock executes immediately, and canceling a processed order is impossible. However, specific orders take time to complete depending upon the additional criteria it comes along. Examples of conditional orders that can take additional time to execute are:
- A purchase order which is lower than the Bid price.
- A sell order which is higher than the Ask price.
- An order to sell a security that has few buyers available.
Let us understand what is the meaning of cancel with the help of an illustration:
Step 1: Investor X places an order to purchase a share of company ABC for Rs. 250
– The shares of company ABC are currently trading at Rs.255
– The purchase order, in this case, cannot be executed until the stock price falls to Rs. 250
– The purchase order appears “pending” until it can meet the criteria set by the investor
Step 2: The investor monitors the share price movements of the company ABC.
– Let us assume that the share price is slowly falling and currently stands at Rs.252
Step 3: Reanalysing the investment decision
– The investor now believes that the share price will reach Rs.250; however, she expects it to fall further due to current industry trends and other external factors
– The investor no longer sees any potential in this investment
Step 4: Cancellation of shares
– Investor X reaches out to her stockbroker and places a cancellation share order
– The “pending” order now stands canceled and will not be executed even if the price reaches Rs.250
Investors can cancel or modify their pending orders by reaching out to their stockbrokers. It can be done manually over a call or by using their online platforms – the latter being the most preferred and easy-to-use approach. Investors can follow these simple steps to cancel their orders:
Step 1: Log in to their online trading platforms
Step 2: Click on the link that redirects them to their order book
Step 3: Find the “pending order” that needs cancellation
Step 4: Click on the pending order
Step 5: Select “modify” or “cancel” depending on the requirement.
The “modify” option will take the investors to a new page that allows them to modify their orders, whereas the “cancel” option will execute the cancellation of the entire order. Investors must check with the stock exchanges about the business hours during which they can cancel the orders.
While the investors always have the option to cancel their pending orders manually, a few may not have the time to monitor their pending orders and take corrective actions. In such cases, investors can choose from customized orders that auto-cancel if the set criteria are not met. For example, a Fill or Kill (FOK) order is auto-cancelled if the ordered quantity of shares is unavailable in the market. Similarly, an Immediate or Cancel (IOC) order is auto-cancelled if it fails to execute immediately.
Frequently Asked Questions
Cancellation of shares is the process by which a company cancels either already issued shares or the unissued ones. This may happen when the company is winding up, reducing its share capital, or buying back its shares from the shareholders. The process of cancellation of shares may vary depending on the type and reason of cancellation, but generally it involves the following steps:
– The company must have a provision in its articles of association that authorises it to cancel its shares.
– The company must convene and hold a board meeting to pass a resolution for the scheme of cancellation of shares and fix a date for a general meeting of the shareholders to approve the resolution.
– The company must issue a notice of the general meeting to all the shareholders, directors, and auditors of the company and attach an explanatory statement that discloses the details and effects of the cancellation of shares.
– The company must hold the general meeting and pass an ordinary or a special resolution, as required by the articles, for the cancellation of shares.
– The company must file a notice of the resolution with the Registrar of Companies (ROC) within 30 days of passing the resolution and submit the necessary documents, such as the altered memorandum and articles of association, if any.
– The company must cancel the share certificates of the cancelled shares and update its books and records accordingly.
– The company must pay off any amount due to the shareholders whose shares are cancelled or issue new shares in lieu of the cancelled ones, as per the terms and conditions of the cancellation scheme.
To cancel your order in Bajaj Financial Securities, you need to follow these steps:
– Log in to your trading account on Bajaj Financial Securities website or mobile app.
– Go to the ‘Order Book’ section and select the order you want to cancel.
– Click on the ‘Cancel’ button and confirm your action.
– You will receive a confirmation message that your order has been cancelled.
No, BFSL does not charge for cancelled orders. However, if you place an order and it gets executed partially or fully, then you will have to pay brokerage charges as per your subscription plan. The brokerage charges for BFSL Demat account start at as low as Rs. 5 per order.
