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

A broker's client sold 500 shares in the cash market on a T+1 basis. By when must the client's shares be available in the broker's pool or designated account for pay-in, as per the usual operational requirement?

The shares must be available before the pay-in deadline on the settlement day. Pay-in is when sellers deliver securities to the clearing corporation, so missing it leads to short delivery and possible auction, and the delay cannot extend a week.

  1. ABefore the pay-in deadline on the settlement dayCorrect
  2. BOnly after the pay-out on the settlement day
  3. CAny time within a week after settlement
  4. DOn the trade day after market close only, never later

Explanation

Securities must be delivered to the clearing corporation through the clearing member before the pay-in deadline on the settlement day. Delivery after pay-out is too late and would cause a short delivery. A week's delay is not permitted.

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