According to BSE sources, BoI Shareholding, the clearing house of the exchange, accepted these shares in the physical mode, while the Sebi diktat passed in the second quarter of December stated that all transactions for these 10 stocks would be completed only in the demat mode. Hence to meet the mismatch which was realised on January 25, the day of the payout, the exchange decided to auction the difference.

It may be recalled that as per Sebi guidelines, all the transactions in these stocks needed to be settled only in the demat form for all investors with effect from the settlement beginning on January 4.

For the settlement ended on January 15 (trading cycle between January 11-15) specificsettlement number 43, a section of the brokers fulfilled their payin obligations in the physical mode. The stocks offered for the auction were Dr Reddy's (1,600 shares), Hero Honda (850), Ranbaxy Labs (50), ACC (50), Gujarat Ambuja Cement (1,500), Bajaj Auto (1,200), Mahindra & Mahindra (350), Tata Tea (1,200), Castrol and Cochin Refinery (100 shares each).

Interestingly, according to a section of marketmen these shares offered for the auction were `share-badla' transactions.

Sharebadla is a hedging vehicle which enables the brokers to take a longterm view of the market. This arrangement is offered exclusively at BSE where carry forward trading is allowed. It enables the brokers to borrow against shares from the market when he does not have an open position in the market.

``If the broker has a teji badla position, he can keep a long position in the market which could be either squared off at a later stage or pay as per the hawala rates,'' explained a veteran BSE broker.

However, the first settlementwhere demat trading was made mandatory for these scrips, settlement ended on January 8, the exchange registered a 100 per cent demat settlement.