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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Other Services Provided by Brokers

Broker Mehta Securities has a client who wishes to borrow shares to deliver in a sale, and another client who wants to earn income on idle shares held in demat. Which exchange-regulated facility, which a broker can help clients access, serves both needs?

The Securities Lending and Borrowing mechanism serves both needs. Lenders earn a fee on idle shares, while borrowers obtain shares to meet delivery obligations. It operates through the exchange and clearing corporation framework, unlike call auctions or odd lot windows, which are only trading mechanisms.

  1. ASecurities Lending and Borrowing (SLB) mechanismCorrect
  2. BCall auction session
  3. CMargin trading funding with pledged units
  4. DOdd lot trading window

Explanation

SLB lets holders lend securities for a fee and lets borrowers obtain securities to meet delivery obligations, through an approved intermediary and the clearing corporation framework. Call auction and odd lot windows are trading mechanisms and do not involve lending of securities for fees.

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