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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Settlement Process

A broker buys 1,000 shares of an Indian company at Rs 200 and sells 600 shares of the same company at Rs 205 for the same client on the same trading day in the same settlement. What is the client's net obligation for this settlement, ignoring charges?

The client pays Rs 77,000 and receives 400 shares. Obligations are netted within a settlement: purchases of Rs 2,00,000 less sales of Rs 1,23,000 leave a net payment of Rs 77,000, and 1,000 bought less 600 sold leaves 400 shares to receive.

  1. APay Rs 77,000 and receive 400 sharesCorrect
  2. BPay Rs 2,00,000 and receive 1,000 shares
  3. CReceive Rs 1,23,000 and deliver 600 shares
  4. DPay Rs 3,23,000 and receive 400 shares

Explanation

Buy value is 1,000 x 200 = Rs 2,00,000. Sell value is 600 x 205 = Rs 1,23,000. Net funds payable is 2,00,000 - 1,23,000 = Rs 77,000, and the net shares to receive are 1,000 - 600 = 400. Adding the two values (Rs 3,23,000) is the mistake of ignoring netting.

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