NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Clearing Process
A clearing member's obligations are computed by the clearing corporation after trading hours. What is the term for reducing a member's many buy and sell trades in the same security on a day into a single net quantity to be delivered or received?
The term is netting. The clearing corporation offsets a member's buy and sell trades in the same security for a settlement day, arriving at one net quantity to deliver or receive, which reduces the number of transfers needed at settlement.
- ANettingCorrect
- BRolling
- CAuctioning
- DHypothecation
Explanation
Netting offsets a member's purchases against sales in the same security on the same settlement day, giving one net deliverable or receivable position. Auction deals with short deliveries, rolling refers to settlement cycles, and hypothecation is a type of charge on securities.
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