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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Market Participants in the Securities Market

A depository participant and a clearing member both appear in a settlement of a sale by client Rohan through broker Mehta Securities. Which sequence correctly describes how Rohan's securities reach the exchange pay-in?

Rohan's securities move from his demat account to the broker's pool account, or are blocked through the early pay-in mechanism, and are then delivered to the clearing corporation at pay-in. Physical delivery is not used, and no debit happens without authorisation.

  1. ARohan's securities move from his demat account to the broker's pool account or are blocked via the early pay-in mechanism, then to the clearing corporation by pay-inCorrect
  2. BRohan's securities are delivered physically to the stock exchange on T day
  3. CThe clearing corporation debits Rohan's demat account directly without any authorisation
  4. DMehta Securities issues new shares to the clearing corporation against Rohan's sale

Explanation

For a sale, the client's securities are transferred from the client demat account to the broker's pool account (or blocked under the early pay-in or similar mechanism) and then to the clearing corporation on pay-in. Physical delivery is not used for listed trades, and the clearing corporation needs authorisation, not a unilateral debit. Brokers do not issue shares.

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