NISM Certifications · NISM-Series-VIII: Equity Derivatives · Trading Mechanism
In the Indian equity derivatives market, which of the following best describes the role of a Trading Member (TM) as distinct from a Clearing Member (CM)?
A trading member can place orders and execute trades on the exchange trading system, but unless it is a self-clearing member it must rely on a clearing member to clear and settle its trades. Guaranteeing settlement and setting contract specifications are not TM functions.
- AA TM can place orders on the exchange trading system but needs a CM to clear and settle its trades if it is not a self-clearing memberCorrect
- BA TM is responsible only for collecting margins from the clearing corporation and cannot deal with clients
- CA TM guarantees settlement of all trades on the exchange without any CM
- DA TM is the entity that decides the contract specifications and lot size
Explanation
A trading member has the right to trade on the exchange through the trading system. Unless it is a self-clearing member, its trades are cleared and settled through a clearing member. The other options attribute functions to the TM that belong to the clearing corporation or the exchange.
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