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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Other Services Provided by Brokers

A broker providing Margin Trading Facility to a client holds the securities purchased under the facility. Where must these securities be kept as collateral?

Securities bought under the Margin Trading Facility must be held as collateral in a separate designated demat account kept apart from the broker's own and other holdings. This segregation protects client assets and prevents misuse of securities by the broker.

  1. AIn the broker's own proprietary demat account
  2. BIn a separate demat account titled for the margin trading facility client collateral, not mixed with other holdingsCorrect
  3. CIn the client's physical custody
  4. DWith the exchange's trading terminal

Explanation

Securities under MTF are held as collateral in a separate, designated demat account (client-wise collateral) so they are segregated from the broker's own holdings and other clients' securities. Using the broker's proprietary account would mix funds and defeat client protection. Physical custody and terminals are not how shares are held.

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