NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Risk Management
A broker has a client with intraday positions only. Which of the following risk controls is most relevant to limiting the broker's exposure on such a client during the day?
Setting client-wise trading limits and monitoring them in real time is the most relevant control, because risk builds during the day. Checking only at day-end or on settlement day is too late, and accepting orders without limit checks leaves the broker exposed.
- ASetting client-wise trading limits and monitoring them in real timeCorrect
- BWaiting until settlement day to check funds
- CRelying only on end-of-day reports
- DAccepting orders without any limit checks
Explanation
Real-time client-wise exposure limits with pre-trade checks control intraday risk. End-of-day or settlement-day checks come too late, and having no limit checks leaves the broker exposed.
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