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

A broker's institutional client trade is to be settled through a custodian. If the custodian does not confirm the trade by the cut-off time on the trade day, what is the usual consequence?

If the custodian does not confirm the trade within the cut-off time, the obligation reverts to the executing broker, who must settle it through its clearing member. The trade is not cancelled by the exchange or settled automatically for the client.

  1. AThe trade is cancelled by the exchange
  2. BThe trade is settled by the broker who executed itCorrect
  3. CThe trade is settled in the client's demat account automatically
  4. DThe trade is deferred to the next financial year

Explanation

For custodial trades, the custodian must confirm the trade within the stipulated time. If the custodian rejects it or fails to confirm, the trade reverts to the trading member's own obligation, who must settle it through its clearing member. The trade is not cancelled.

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