NISM Certifications · NISM-Series-VI: Depository Operations · Functions of Depository Participant - Trading and Settlement
A client's broker is not a clearing member but trades through a clearing member. The client sells shares. In which account will shares ordinarily be transferred for pay-in?
Shares are transferred to the pool account of the clearing member who settles the trade, since a non-clearing trading member relies on that clearing member for settlement. It is not the broker's proprietary account or a bank account, because the bank holds funds and client securities must not be mixed with proprietary holdings.
- AThe trading member's own proprietary demat account at the exchange
- BThe pool account of the clearing member through whom the trade is cleared and settledCorrect
- CThe beneficial owner account of the exchange
- DThe clearing corporation's escrow bank account
Explanation
Settlement is performed by the clearing member responsible for the trade, so the securities go to that clearing member's pool account. A trading member that is not a clearing member relies on the clearing member to settle. The proprietary account is not used for client securities, and a bank account holds funds, not shares.
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