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

A broker has a net obligation on a day: Client A bought 300 shares of XYZ and Client B sold 100 shares of XYZ, both through the broker, and the broker has no other trades in XYZ. In the broker's obligation with the clearing corporation for that settlement, what is the position in XYZ?

The broker has a net receive position of 200 shares in XYZ and must pay funds for them. The clearing corporation nets obligations security-wise at member level, so 300 bought less 100 sold leaves 200 shares to be received.

  1. ANet receive of 200 shares and pay funds for themCorrect
  2. BNet deliver of 200 shares
  3. CGross receive of 300 and no delivery
  4. DNo obligation as the trades offset

Explanation

Clearing corporation nets each member's obligation security-wise: buys 300 minus sells 100 gives a net purchase of 200 shares, so the broker receives 200 shares and pays the corresponding net funds. Gross treatment is not used for the member-level obligation, and offsetting is partial rather than complete. Client-level allocation is handled separately by the broker.

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