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

A trading member wants to carry out trading in equity derivatives on behalf of clients. Which statement about the client-level requirement is correct?

A member must obtain a completed KYC form and sign the prescribed member-client agreement with every client before executing trades. The requirement applies to all clients, retail or institutional, and applies before trading begins, which protects investors and supports audit trail and regulatory compliance.

  1. AA client may trade through any member without entering a client registration document
  2. BA member must enter into a written agreement and obtain a Know Your Client form from every client before tradingCorrect
  3. COnly institutional clients need to be registered with the member
  4. DKYC is required only after the client's first loss-making trade

Explanation

Every client must be registered with the member through the prescribed KYC and a written member-client agreement before any trade is executed. This applies to all clients, not only institutions, and must precede trading, not follow it.

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