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

A trading member in the derivatives segment has a trade-wise mark-to-market loss. Which statement about the member's obligation to the clearing corporation on a futures position is correct?

Daily mark-to-market losses on futures positions are collected in cash from the clearing member through the clearing corporation's daily settlement. They are not deferred until expiry or waived because of a hedge, and the investor does not pay the exchange directly.

  1. AMTM losses are collected from the member in cash on a daily basis in line with the clearing corporation's settlementCorrect
  2. BMTM losses are carried forward until expiry without collection
  3. CMTM losses are waived if the position is hedged by a spot position
  4. DMTM losses are paid only by the investor directly to the exchange

Explanation

Futures are marked to market daily, and the loss is settled in cash through the clearing member's account with the clearing corporation. It is not deferred to expiry, and hedged status does not waive it. The clearing member, not the investor, pays to the clearing corporation.

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