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

A client sells shares held in her demat account through a broker. For the delivery to be settled properly, which action must occur by the pay-in deadline?

The shares must be made available to the clearing corporation by the pay-in deadline, either by transfer from the client's demat account to the broker's pool account, early pay-in, or a block mechanism. Without this, the sale results in a short delivery and an auction.

  1. AShares are delivered from the client's demat account to the broker's pool account or are blocked/early pay-in is made so the clearing corporation receives themCorrect
  2. BThe client sends physical share certificates to the exchange
  3. CThe broker pays the client in advance and the delivery is skipped
  4. DThe depository transfers shares to the buyer's broker only after the pay-out day

Explanation

For delivery-based sales, shares must reach the clearing corporation by pay-in, either through transfer to the broker's pool account, early pay-in, or a blocking mechanism. Physical certificates are not used for market trades, and delivery cannot be skipped. Delivery after pay-out day would be a settlement failure.

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