NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Market Participants in the Securities Market
In the Indian securities market, which entity is responsible for guaranteeing the settlement of trades executed on a recognised stock exchange by acting as the central counterparty to every trade?
A clearing corporation guarantees settlement of exchange-traded trades by becoming the central counterparty through novation, so it is buyer to every seller and seller to every buyer. Depository participants, registrars and merchant bankers do not perform this guarantee function.
- AClearing corporationCorrect
- BDepository participant
- CRegistrar and transfer agent
- DMerchant banker
Explanation
A clearing corporation novates trades and becomes the central counterparty, guaranteeing settlement. A depository participant only provides demat services, an RTA maintains issuer records, and a merchant banker manages issues.
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