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

A trading member of a derivatives segment wants to trade on behalf of clients. Which of the following is a requirement under the regulatory framework for clients' dealings?

A trading member must complete the client's KYC and provide a risk disclosure document, with the client's acknowledgement, before trading for that client. There is no exemption for small trades, registration cannot be delayed until settlement, and disclosure is not limited to option sellers.

  1. AThe member must obtain a signed Know Your Client form and a risk disclosure document acknowledged by the client before tradingCorrect
  2. BClients may trade without KYC if the trade size is below Rs 1 lakh
  3. CThe member needs to register the client only after the first settlement
  4. DRisk disclosure is needed only for options sellers

Explanation

Before dealing for a client, the member must complete KYC and give the risk disclosure document, taking the client's acknowledgement. There is no turnover-based exemption from KYC, registration cannot wait until settlement, and the disclosure applies to all derivatives clients, not only option sellers.

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