NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Other Services Provided by Brokers
A client opens a trading account with a broker and wants to use the broker's internet-based trading (IBT) facility. Which of the following is a requirement for the broker offering it?
A broker offering internet-based trading must obtain the exchange's approval and ensure strong security: authentication, encryption, audit trail and backup systems. The responsibility is not only the client's, and the service is provided under the documented account terms.
- ANo exchange approval is needed for providing internet-based trading
- BThe broker must have adequate security, such as authentication, encryption and backup systems, and prior approval from the exchangeCorrect
- COnly the client needs to maintain security; the broker has no obligation
- DIBT can be offered without any written agreement with the client
Explanation
Internet-based trading must meet SEBI and exchange requirements, including secure login authentication, encryption, audit trails, backup and business continuity, and the broker needs exchange permission. The broker has responsibility for system security, and client terms are documented. The other statements ignore these rules.
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