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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets

In the Indian securities market, which of the following best describes the role of a clearing corporation after a trade is executed on a recognised stock exchange?

A clearing corporation acts as the central counterparty after trade execution and guarantees settlement. It becomes the buyer to every seller and seller to every buyer. Holding demat securities is a depository function, while listing is done by exchanges and broker registration by SEBI.

  1. AIt acts as the central counterparty and guarantees settlement of tradesCorrect
  2. BIt lists companies and approves their offer documents
  3. CIt holds investors' securities in dematerialised form
  4. DIt issues licences to stock brokers

Explanation

After execution, the clearing corporation novates trades and becomes the central counterparty to both sides, guaranteeing settlement. Holding securities in demat form is the depository's role, listing is the exchange's function, and registration of brokers is done by SEBI.

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