Skip to content

NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Clearing and Settlement System

A clearing member has two clients. Client A is long 1,000 units and Client B is short 400 units of the same stock futures contract. Under the clearing member's position reckoning, what is the client-level and member-level treatment for margin purposes in India?

Margins are computed on the net position at each client level, and the member's total margin is the sum of client-level margins. Positions of different clients are never netted against each other, so the 1,000 and 400 units are added, not offset.

  1. AMargins are levied on the net position of 600 units across both clients
  2. BMargins are levied on the gross position of 1,400 units for the member
  3. CMargins are levied on net position at each client level, and the member's margin is the sum across clientsCorrect
  4. DMargins are levied only on Client A as the larger position

Explanation

Netting is allowed only at the individual client level, not across different clients. Client A has net 1,000 and Client B net 400, so the member-level requirement is the sum of client-level margins, based on 1,400 units in total. Netting across clients (600) is not allowed.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to Clearing and Settlement System shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to Clearing and Settlement SystemFree diagnostic mock

More Introduction to Clearing and Settlement System questions