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

A broker's client sells 500 shares in a T+1 settlement but the shares are held in the client's demat account with a different depository participant. Which step is needed so that the shares are available for the pay-in?

The client must authorise the debit of the shares, through a delivery instruction or the electronic e-DIS process using a TPIN, so they can move to the clearing corporation for pay-in. No debit happens automatically without the client's authorisation.

  1. AThe client must give a delivery instruction or the shares must be blocked via the early pay-in or TPIN/e-DIS authorisation processCorrect
  2. BThe exchange automatically debits the shares without any authorisation
  3. CThe broker transfers shares from its own proprietary account
  4. DThe clearing corporation waits until the client physically submits a slip to the exchange

Explanation

For a client's shares to be delivered to the clearing corporation, the client must authorise the debit, through a delivery instruction slip or electronic authorisation such as e-DIS with TPIN, or via the pledge/block mechanism. The exchange cannot debit without authorisation, and a broker may not use its own stock for a client's sale.

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