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 after a trade is executed on a stock exchange?
A clearing corporation acts as the central counterparty after trade execution, becoming buyer to every seller and seller to every buyer, and guarantees settlement. Listing, demat account maintenance and rule-making belong to exchanges, depositories with depository participants, and SEBI respectively.
- AIt acts as the central counterparty and guarantees settlement of tradesCorrect
- BIt lists companies and approves their public issues
- CIt maintains the demat accounts of retail investors
- DIt frames the regulations for stock brokers
Explanation
After trade execution, the clearing corporation novates the trade and becomes the buyer to every seller and seller to every buyer. This guarantees settlement. Listing is done by exchanges, demat accounts are maintained by depositories through DPs, and regulations are framed by SEBI.
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