Skip to content

CS Executive · Capital Market and Securities Laws · Secondary Market in India

Aarav buys 100 shares of a listed company through a trading member of NSE. The trading member is a corporate member of the exchange, and Aarav's shares are credited to his demat account at the end of settlement. Which entity in the secondary market structure is responsible for guaranteeing and settling the trade between the two trading members?

The clearing corporation of the exchange guarantees and settles trades between trading members. It becomes the central counterparty, collects margins and ensures delivery and payment. Registrars, merchant bankers and depository participants perform other roles and do not guarantee secondary market trades.

  1. AClearing corporation of the exchangeCorrect
  2. BRegistrar and transfer agent of the company
  3. CDepository participant of the seller
  4. DMerchant banker to the issue

Explanation

In the secondary market a clearing corporation acts as the counterparty to trades, guarantees settlement and manages risk through margins. A registrar maintains issuer records and a merchant banker works on public issues, so neither guarantees trades. A depository participant only provides demat access to investors.

Did you get it right without looking?

One question tells you little. A timed set on Secondary Market in India shows your real accuracy, how long you take and where you lose marks.

Practise Secondary Market in IndiaFree diagnostic mock

More Secondary Market in India questions