NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Pledge and Hypothecation
In the depository pledge process, a pledge is created in the depository system only when:
A pledge is created when the pledgor gives a pledge instruction through their DP and the pledgee confirms it. Both parties' participation is needed. Neither the issuer nor the stock exchange approves it, so the pledgee's confirmation completes the creation.
- AThe pledgor submits a pledge instruction and the pledgee confirms itCorrect
- BThe pledgee alone submits the instruction without the pledgor's consent
- CThe issuer company approves the pledge in its register
- DThe stock exchange registers the pledge on the trading platform
Explanation
Pledge creation needs a pledge instruction from the pledgor and confirmation by the pledgee, each through their DPs. Without confirmation, the pledge is not completed. Issuer or exchange approval is not part of the process.
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