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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Investor Grievances and Arbitration

Rahul has a dispute with his stock broker about a trade executed on the exchange. He is dissatisfied with the broker's reply and wishes to start arbitration under the exchange's mechanism. Which of the following is the general position on arbitration?

Arbitration lets a client and a trading member settle disputes arising from exchange dealings. The client can file an arbitration reference with the exchange's arbitration mechanism after unsatisfactory resolution by the broker. It is open to clients, needs no prior court ruling, and is not a depository process.

  1. AArbitration is a mechanism for resolving disputes between a client and a member arising out of dealings on the exchange, and the client files the reference with the exchange's arbitration processCorrect
  2. BArbitration can be initiated only by the broker against the client
  3. CArbitration is available only after a civil court has decided the dispute
  4. DArbitration can be started only through the depository, never through the exchange

Explanation

Exchange arbitration is available for disputes between clients and members relating to dealings on the exchange, and the client can file a reference under the exchange's process. It is not restricted to brokers, does not need a prior court decision, and is not routed through the depository for trading disputes.

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