NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Settlement Process
Funds and securities pay-in for a trade must be made by the broker to the clearing corporation. Which of the following correctly describes the securities pay-in in the demat mode?
In demat settlement the seller's securities move from the client's account to the broker's pool account and then to the clearing corporation's account at pay-in. The clearing corporation then gives them to buying brokers at pay-out, so the transfer is not direct between buyer and seller.
- AThe seller's broker delivers shares from the client's demat account to the broker's pool account, then to the clearing corporation's accountCorrect
- BThe buyer delivers shares to the seller's pool account
- CThe exchange physically delivers share certificates to the buyer
- DThe depository transfers shares directly to the buyer's account without clearing corporation involvement
Explanation
In demat settlement, the selling client transfers securities to the broker's pool account, and the broker's pool account delivers them to the clearing corporation's account through the depository on pay-in. The clearing corporation then passes them to the buying brokers on pay-out. The buyer does not deliver, and the depository does not bypass the clearing corporation.
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