NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Risk Management
A client buys shares and the trade is settled on a T+1 rolling basis on the exchange. The client's broker should collect the pay-in obligation from the client so that the broker can meet the funds pay-in to the clearing corporation by which time?
The broker should collect the client's payment before the clearing corporation's funds pay-in deadline on the settlement day. The broker must deliver funds to the clearing corporation by then, so delayed collection would expose the broker to funding risk or default.
- ABefore the clearing corporation's funds pay-in deadline on the settlement dayCorrect
- BWithin 30 days of the trade
- COnly after the shares are sold by the client
- DAt the end of the financial year
Explanation
The broker owes funds to the clearing corporation at the pay-in time on the settlement day. To avoid using its own funds or defaulting, the broker must recover the client's dues in time for that deadline. Options with later dates would leave the broker exposed.
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