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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Other Services Provided by Brokers

A client who trades online through a broker's mobile app asks what the Internet-based trading service of a broker requires from a regulatory perspective. Which is correct?

A broker offering internet-based trading must obtain exchange permission and maintain adequate security, authentication and risk-control systems. The facility is available to retail clients and does not require them to be physically present at the broker's office.

  1. ANo exchange permission is required for internet trading
  2. BThe broker must have exchange approval and put in place adequate security and risk controls for internet-based tradingCorrect
  3. CThe client must be physically present at the broker's office for each order
  4. DOnly institutional clients may use it

Explanation

Internet-based trading requires prior exchange permission and adequate systems for security, authentication and risk controls. It is open to retail clients and does not require physical presence.

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