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NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to the Indian Capital Market

An investor buys 100 shares on the exchange on a trading day. Under the Indian rolling settlement framework, what is the correct sequence of post-trade activities leading to the shares reaching the investor's demat account?

The sequence is trade execution, then clearing where the clearing corporation determines obligations, then settlement through pay-in and pay-out of funds and securities, finally crediting shares to the investor's demat account via the depository. Settlement cannot precede trade, and clearing is not a depository function.

  1. ATrade execution, clearing by the clearing corporation to determine obligations, then settlement with pay-in and pay-out of funds and securitiesCorrect
  2. BSettlement with pay-out first, then trade execution, then clearing
  3. CClearing by the depository, then trade execution, then settlement by the exchange
  4. DTrade execution, then direct transfer by the seller to the buyer outside the depository system

Explanation

After the trade is executed, the clearing corporation computes obligations (clearing). Then settlement occurs through pay-in of funds and securities by members and pay-out to them, after which delivery is credited to the investor's account through the depository. Pay-out cannot precede execution, and the clearing function is not performed by the depository.

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