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

A client wishes to use a trading member's internet-based trading facility. Which statement best reflects the broker's obligation regarding such a service?

The broker must ensure adequate security, user authentication and risk management controls for its internet trading system. Regulatory requirements apply even though the client enters orders personally, so pre-trade risk checks and system safeguards remain the broker's responsibility.

  1. AThe broker may skip risk checks because the client places orders personally
  2. BThe broker must ensure adequate security, authentication and risk controls for the systemCorrect
  3. COnly the exchange is responsible for client login security
  4. DInternet trading is allowed only in the cash segment without margins

Explanation

Exchanges and SEBI require brokers offering internet-based trading to maintain secure systems, proper user authentication and pre-trade risk controls. Responsibility does not shift solely to the exchange, and risk checks apply to all order routes, including in derivatives.

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