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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Securities Market Segments

In the Indian securities market, which statement best describes the role of a clearing corporation in the settlement of exchange-traded trades?

A clearing corporation acts as the central counterparty to exchange trades. It becomes the buyer to every seller and the seller to every buyer, which guarantees settlement and removes counterparty risk between the original trading members.

  1. AIt acts as the central counterparty, guaranteeing settlement by becoming buyer to every seller and seller to every buyerCorrect
  2. BIt lists companies and approves their offer documents for public issues
  3. CIt maintains investors' demat accounts and processes their transfer instructions
  4. DIt regulates stock brokers and frames rules for their capital adequacy

Explanation

A clearing corporation novates trades and acts as central counterparty, which guarantees settlement. Maintaining demat accounts is the work of depository participants and depositories. Listing approvals rest with the exchange and SEBI regulates brokers, so these options describe other bodies.

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