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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Securities Market Segments

In the Indian securities market, which entity acts as the central counterparty that guarantees settlement of trades executed on a stock exchange's cash segment?

The clearing corporation of the exchange is the central counterparty. It steps in between buyer and seller through novation and guarantees settlement, backed by its settlement guarantee fund, whereas depository participants, RTAs and custodians perform record-keeping or custody roles rather than guaranteeing trades.

  1. AThe depository participant of the buyer
  2. BThe clearing corporation of the exchangeCorrect
  3. CThe registrar and transfer agent of the issuer
  4. DThe custodian of the selling broker

Explanation

A clearing corporation novates trades and becomes the counterparty to both buyer and seller, guaranteeing settlement through a settlement guarantee fund. Depository participants and RTAs only handle holding and records of securities, and custodians settle on behalf of institutional clients, so none of them guarantees trades.

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