NISM Certifications · NISM-Series-VI: Depository Operations · Functions of Depository Participant - Trading and Settlement
A client gave an on-market delivery instruction to the DP on the day before pay-in, but the broker's clearing member ID mentioned in the instruction was wrong. What is the most likely consequence?
The instruction will fail because the clearing member details do not match the settlement requirement, so the shares do not reach the pool account. The client must submit a corrected instruction before the pay-in deadline, otherwise the broker may face a short delivery and the client may be penalised.
- AThe depository will automatically correct the ID using the trade file
- BThe instruction fails to settle because the target pool account details do not match, and the client must re-instruct before the deadlineCorrect
- CThe shares are credited to the client's own account twice
- DThe trade is automatically cancelled by the exchange without penalty
Explanation
Settlement depends on correct details such as the clearing member ID, market type and settlement number. A mismatch means the instruction cannot be matched or executed, so shares do not reach the pool and the client faces short delivery risk unless a valid instruction is placed in time. Depositories do not auto-correct such details.
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