NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Securities Market
In the Indian securities market, which of the following is the primary function of a stock exchange's clearing corporation?
A clearing corporation guarantees settlement of trades by acting as the central counterparty, becoming seller to every buyer and buyer to every seller. This removes counterparty risk. It does not list companies, open demat accounts or set interest rates.
- AGuaranteeing the settlement of trades by acting as a central counterpartyCorrect
- BListing companies and approving their offer documents
- CIssuing demat account numbers to investors
- DSetting the repo rate for banks
Explanation
A clearing corporation novates trades and becomes the central counterparty to both buyer and seller, guaranteeing settlement. Listing approvals are an exchange and SEBI matter, demat accounts are opened through depository participants, and the repo rate is set by the RBI.
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