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

A broker has a net obligation for the day in which funds payable to the clearing corporation and receivable from it are computed across several trades. In multilateral netting at the clearing corporation, what is the net position calculated for a clearing member in a security?

The clearing corporation nets the member's total buys against total sells in each security for that settlement. The result is a single net receivable or payable per security, such as buys of 800 less sells of 500 giving a net receipt of 300 shares.

  1. ASeparately for each client only, with no member-level netting
  2. BThe difference between total buy and total sell quantities of that security across all its trades in that settlementCorrect
  3. CThe total sell quantity only
  4. DThe sum of buy and sell quantities

Explanation

Multilateral netting reduces a member's obligations to a single net position per security in the settlement, which is buys minus sells. If buys are 800 and sells are 500, the member has a net receivable of 300. Adding quantities, or taking only sells, does not represent netting.

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