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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Introduction to the Securities Market

A broker's client wants to know why a stock exchange is described as a 'self-regulatory organisation' (SRO) in the Indian securities market. Which statement best reflects this?

A stock exchange is an SRO because it frames and enforces its own rules, bye-laws and disciplinary action for members and listed companies, while operating under SEBI's overall supervision. It does not issue securities, set monetary policy or guarantee profits.

  1. AIt frames and enforces rules for its members and listed companies, subject to SEBI oversightCorrect
  2. BIt sets monetary policy for the securities market
  3. CIt issues all securities on behalf of companies
  4. DIt guarantees the profit of every trade executed by members

Explanation

A stock exchange acts as an SRO by making bye-laws, rules and regulations for its members and for trading, monitoring compliance and taking disciplinary action, all under SEBI's supervision. It does not set monetary policy, issue securities itself, or guarantee investor profits.

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