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

A trading member of an exchange wants to settle trades for clients but does not wish to be a clearing member itself and has no membership of the clearing corporation. Which arrangement allows this?

A trading member without clearing membership settles through a clearing member with whom it is attached. That clearing member clears and settles the trades and is responsible to the clearing corporation for the obligations, so the trading member need not hold clearing rights itself.

  1. ABecoming a professional clearing member
  2. BRegistering as a sub-broker with the clearing corporation
  3. CAttaching itself to a clearing member who clears and settles its tradesCorrect
  4. DOpening a direct pay-in account with the depository

Explanation

A trading member that is not a clearing member must have its trades cleared and settled through a clearing member, who takes responsibility for its obligations to the clearing corporation. A professional clearing member only clears for others and does not trade itself, but the arrangement the trading member uses is attaching to a clearing member. The other options do not provide clearing access.

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