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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Legal and Regulatory Environment

A trading member has a client whose gross open position in index derivatives is large. Under SEBI's approach to risk management, which statement about collection of margins is correct?

Members must collect upfront margins from clients before positions are taken and report client-level margin collection to the clearing corporation. Delayed collection, waivers for long-standing customers, or margining only at member level are inconsistent with SEBI's risk management framework, which is monitored.

  1. AUpfront margins must be collected from clients by the member before the position is taken, and the member must report client margin details to the clearing corporationCorrect
  2. BMargins may be collected from clients any time within a month after the trade
  3. CMargins are collected only from members, never from clients
  4. DMargins need not be collected if the client is a long-standing customer

Explanation

SEBI requires upfront collection of margins from clients, with members reporting client-level margin collection to the clearing corporation, which is monitored. Delayed collection, exemption for old clients or member-only margining is not consistent with this framework.

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