NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Other Services Provided by Brokers
A stock broker offers a client a facility to buy shares by paying only a part of the transaction value upfront, with the broker funding the balance and charging interest. Under the SEBI framework, what is this facility called?
The facility is called Margin Trading Facility. The client pays only a portion of the purchase value upfront, and the broker finances the remainder, charging interest, with the purchased securities and other collateral held as security under exchange and SEBI norms.
- AMargin Trading FacilityCorrect
- BSecurities Lending and Borrowing
- CAlgorithmic trading
- DDirect market access
Explanation
Margin Trading Facility lets clients buy securities by paying a part of the value upfront, while the broker funds the balance against collateral of securities and charges interest. SLB involves lending securities, not funding purchases. Algo trading and DMA relate to order placement methods.
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