NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Settlement Process
A broker's pay-in obligation to the clearing corporation for a settlement is determined on which basis?
The pay-in obligation is based on the clearing member's net position across its trades for the settlement, covering both funds and securities. Netting is done at member level, not separately by client, and funds obligations are not ignored.
- AGross obligation of each client separately, without netting
- BOnly the broker's proprietary trades, excluding clients
- CNet obligation of the clearing member across its trades for that settlement, in funds and securitiesCorrect
- DOnly the sell side obligation in securities, with funds ignored
Explanation
Clearing corporations determine obligations by netting each clearing member's buy and sell positions in each security for the settlement, giving a net funds and securities obligation. It includes both proprietary and client trades at the member level. Client-wise gross treatment and ignoring funds are incorrect.
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