NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Settlement Process
A clearing member fails to deliver the securities due in the pay-in for a normal equity cash market trade. The shortage is most commonly handled by the exchange through which process?
The exchange handles short delivery by conducting an auction in which the shortfall securities are bought for the buyer. If the auction fails to procure them, the trade is closed out at the prescribed close-out price, and the buyer is compensated accordingly.
- AAuction of the shortfall securities on the exchangeCorrect
- BAutomatic conversion into a futures position
- CCancellation of the buyer's demat account
- DTransfer of the shortage to the next day's pay-in with no action
Explanation
When a seller member short-delivers, the exchange conducts an auction to buy the securities for the buyer's pay-out. If the auction cannot be completed, the trade is closed out at the prescribed close-out price. The other options are not part of the settlement procedure.
Did you get it right without looking?
One question tells you little. A timed set on Settlement Process shows your real accuracy, how long you take and where you lose marks.
More Settlement Process questions
- Which statement about the role of a clearing corporation as the central counterparty (CCP) in settlement is correct?
- A broker receives a client's securities pay-out into its pool account on settlement day. Under SEBI's rules on handling client securities, w…
- A broker's pay-in obligation to the clearing corporation for a settlement is determined on which basis?
- A clearing member fails to deliver the securities for a sale in the equity cash segment on the pay-in day, and the shortage cannot be met. W…
- In the Indian equity cash market, the standard rolling settlement cycle for trades is currently:
- If a short-delivered security cannot be purchased in the auction, what is the usual result for the buyer?