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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Settlement Process

On a settlement day, Member A has to receive 1,000 shares of a company at ₹200 per share from the clearing corporation, and has to deliver 400 shares of the same company at ₹200 per share. Under multilateral netting, what is Member A's obligation in this security?

Member A receives a net 600 shares and pays a net ₹1,20,000. Netting offsets 400 shares sold against 1,000 bought, and offsets ₹80,000 of sale proceeds against ₹2,00,000 of purchase cost, leaving only the difference to settle.

  1. AReceive 600 shares and pay ₹1,20,000Correct
  2. BReceive 1,000 shares and pay ₹2,00,000 while delivering 400 shares separately
  3. CDeliver 600 shares and receive ₹1,20,000
  4. DReceive 600 shares and pay ₹2,80,000

Explanation

Net securities = 1,000 bought less 400 sold = 600 shares to receive. Net funds = ₹2,00,000 payable on purchases less ₹80,000 receivable on sales = ₹1,20,000 payable. The option showing gross figures ignores netting, and ₹2,80,000 wrongly adds the sale value.

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