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 stock exchange's clearing corporation?
A clearing corporation guarantees settlement of trades by becoming the central counterparty to both buyer and seller. This removes counterparty risk. It does not issue shares, frame listing regulations, or hold investors' demat balances, which are functions of companies, SEBI and depositories respectively.
- AIt guarantees the settlement of trades by acting as the central counterpartyCorrect
- BIt issues new shares on behalf of companies in an IPO
- CIt frames the listing regulations for companies
- DIt maintains the dematerialised holdings of investors
Explanation
A clearing corporation novates trades and becomes the central counterparty to each side, guaranteeing settlement. Issuing shares is done by the company with its merchant bankers, listing rules come from SEBI, and holdings are kept by depositories.
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