NISM Certifications · NISM-Series-VI: Depository Operations · Functions of Depository Participant - Trading and Settlement
Mr. Iyer sold shares on the stock exchange. His broker's clearing member pool account should receive the shares before the pay-in deadline. If Mr. Iyer does not deliver the shares on time, what is the immediate consequence in settlement?
Non-delivery by pay-in time results in a short delivery for the clearing corporation, which may then run an auction to source the shares. Depositories do not take shares from other investors, and a DP cannot cancel the exchange trade.
- AThe clearing corporation treats it as a short delivery and may conduct auction for the shortfallCorrect
- BThe depository credits the shares automatically from other clients' accounts
- CThe sale trade is cancelled by the DP without any charge
- DThe shares are converted into physical form
Explanation
Failure to deliver by pay-in leads to short delivery at the clearing corporation, which handles it through the auction mechanism. A depository never debits other investors' accounts, and DPs cannot cancel exchange trades.
Did you get it right without looking?
One question tells you little. A timed set on Functions of Depository Participant - Trading and Settlement shows your real accuracy, how long you take and where you lose marks.
More Functions of Depository Participant - Trading and Settlement questions
- Arjun's broker failed to deliver shares bought by Arjun, and the exchange conducted an auction. Under this process, the shortfall in deliver…
- A client sold shares through a broker and wants the demat account debited for the settlement. Which instruction is normally used to move the…
- Mr. Iyer sold shares through his broker and wants to deliver them from his demat account for pay-in. Which mechanism lets him transfer the s…
- Which statement about an off-market transfer instruction given by a client to a DP is correct?
- A client bought shares on the exchange and the clearing corporation has credited them on the pay-out day. Into which account of the client a…
- A clearing member has to deliver securities for pay-in of a trade on the exchange. Which account is typically credited with the securities b…