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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Market Participants in the Securities Market

A trading member is not a clearing member and does not wish to clear its own trades. A clearing corporation recognises several categories of clearing members. Which statement is correct about a Professional Clearing Member (PCM)?

A Professional Clearing Member clears and settles trades for other trading members and custodial participants, and it does not trade on its own account. This differs from a self-clearing member, which clears its own and its clients' trades.

  1. AA PCM clears and settles trades only for its own proprietary trades
  2. BA PCM clears and settles trades for trading members and custodial participants but does not trade on its own account on the exchangeCorrect
  3. CA PCM can only be a depository participant
  4. DA PCM is a person who guarantees settlement to the clearing corporation on behalf of the exchange

Explanation

A PCM is a clearing member, typically a bank or institution, that clears trades for other trading members and custodial participants. Self-clearing members clear their own and clients' trades, which is why the first option is wrong. The other options describe unrelated roles.

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