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

A clearing member has a gross exposure that changes through the day. Under SEBI's framework for upfront collection of margins in the cash and derivatives segments, which statement is correct?

Margins must be collected upfront from clients by members, who cannot allow positions beyond the margin collected. The clearing corporation monitors these collections and levies penalties for shortfalls, so deferred or sell-only margin collection is not permitted.

  1. AClients' margins may be collected after the trade is executed, at the end of the following week
  2. BClearing members must collect upfront margins from clients and cannot allow trading positions beyond the margin collected, with the clearing corporation monitoring and penalising shortfallsCorrect
  3. COnly the clearing corporation collects margins and members need not collect from clients
  4. DMargins are collected only for sell positions

Explanation

SEBI requires upfront margin collection from clients, with the clearing corporation monitoring collection and reporting by members. Penalties apply for shortfalls. Margin is not deferred, applicable only to sales, or restricted to the clearing corporation.

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