NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Clearing Process
A clearing member has a trade-wise obligation file generated after the trading day. What is the main purpose of the multilateral netting carried out by the clearing corporation for the cash segment?
Multilateral netting reduces a member's many trades to a single net obligation per security and a net funds amount for the settlement. This lowers the volume of deliveries and payments needed, and it is not used to cancel trades or set prices.
- ATo compute a single net securities and funds obligation per member for each security and settlementCorrect
- BTo cancel trades that exceed the member's margin
- CTo convert all trades into derivative positions
- DTo fix the closing price of each security
Explanation
Multilateral netting offsets a member's buys and sells in each security across all counterparties, giving one net delivery or receipt position per security and a net funds obligation. It does not cancel trades, change products or set prices.
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