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

A stockbroker offers a facility under which a client can use eligible securities to obtain funds to buy more securities, with the securities held as collateral and the broker charging interest on the funds. Which SEBI-regulated service is this?

This is the Margin Trading Facility. The broker funds part of the client's purchase of eligible securities, holds the securities as collateral and charges interest on the funds provided, which distinguishes it from algorithmic trading, portfolio management or securities lending.

  1. AMargin Trading FacilityCorrect
  2. BAlgorithmic trading
  3. CPortfolio management service
  4. DSecurities lending and borrowing for short sellers only

Explanation

Margin Trading Facility lets a broker fund a part of the client's purchase against collateral of securities, with interest charged on the amount funded. Algorithmic trading is automated order placement, and PMS is discretionary or non-discretionary management of portfolios by a registered portfolio manager. SLB concerns lending securities for a fee, not financing purchases.

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