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

A clearing member's trades on a day result in a securities obligation of 500 shares to deliver in Company A and 300 shares to receive in the same Company A, for the same settlement. How is the member's obligation for Company A determined in the clearing process?

The member has a net delivery obligation of 200 shares. Clearing nets purchases and sales in the same security for the same settlement, so 500 shares to deliver less 300 shares to receive leaves 200 shares to be delivered.

  1. ADeliver 500 shares and receive 300 shares separately, with no netting
  2. BNet deliver obligation of 200 sharesCorrect
  3. CNet receive obligation of 200 shares
  4. DDeliver 800 shares

Explanation

Clearing computes obligations on a net basis for each security and settlement: 500 delivered minus 300 received leaves a net delivery of 200 shares. Gross settlement of both legs is not applied, and receipt is not the net position since sales exceed purchases.

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