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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Introduction to the Securities Market

A stock exchange in India is permitted to operate as a market only after fulfilling certain legal requirements. Which statement about the recognition and structure of stock exchanges is correct?

Recognised stock exchanges must be corporatised and demutualised, meaning ownership, management and trading rights are separated. This reduces conflicts of interest. Exchanges need recognition, are regulated by SEBI, and shareholding limits apply to prevent members from controlling them.

  1. AA stock exchange can operate without recognition if it has more than 100 members
  2. BRecognised stock exchanges are required to be corporatised and demutualised, separating ownership, management and trading rightsCorrect
  3. CStock exchanges are regulated only by the RBI and not by SEBI
  4. DA stock exchange may allow trading members to own a majority stake without any limit

Explanation

Following SEBI's demutualisation reforms, recognised exchanges are corporatised and demutualised so that ownership, management and trading membership are separate, reducing conflicts of interest. Recognition is mandatory, SEBI is the securities regulator, and shareholding limits apply to prevent control by members.

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