NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Securities Market
In the Indian securities market, which of the following best describes the role of a clearing corporation?
A clearing corporation acts as the central counterparty to every trade, guaranteeing settlement to buyers and sellers through novation. It does not list companies, open demat accounts or regulate brokers; those functions belong to exchanges, depository participants and SEBI respectively.
- AIt guarantees settlement of trades by acting as the central counterparty to buyers and sellersCorrect
- BIt lists companies and decides their IPO price
- CIt issues demat account numbers to investors
- DIt regulates stock brokers and frames market rules
Explanation
A clearing corporation novates trades and becomes the counterparty to both sides, guaranteeing settlement. Listing is done by the exchange, demat accounts by depository participants, and regulation by SEBI.
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