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CS Professional · IFSCA - Regulations, Listing and Compliances · India International Bullion Exchange (IIBX)

Arjun Metals, a trading member, has bought bullion on IIBX and the trade is due for settlement. The firm argues that since the buyer and seller already agreed terms, the clearing corporation has no role. Which response is correct under the bullion exchange and clearing framework?

The clearing corporation clears and settles trades done on the bullion exchange and manages counterparty risk through margins and settlement safeguards. Agreement between buyer and seller does not remove this role, and neither the vault manager nor RBI alone replaces it.

  1. ACorrect, because clearing corporations are involved only in derivatives trades
  2. BCorrect, because the vault manager alone guarantees settlement
  3. CIncorrect, because settlement is done by RBI through its payment systems alone
  4. DIncorrect, because the clearing corporation clears and settles trades, managing risk through margins and settlement guarantee mechanismsCorrect

Explanation

The clearing corporation handles clearing and settlement of exchange trades and manages counterparty risk through margins and similar mechanisms. The vault manager only holds and delivers bullion; RBI does not settle these trades alone. Agreed terms do not remove the clearing role.

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