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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Other Services Provided by Brokers

Under SEBI's framework for margin trading facility (MTF), which of the following is correct?

Only SEBI-registered stockbrokers who satisfy the prescribed conditions can offer margin trading facility, and the securities bought under it are held as collateral for the funding. Brokers cannot misuse client securities for their own trades, and only eligible stocks qualify for MTF.

  1. AOnly stockbrokers registered with SEBI and meeting prescribed conditions can offer MTF, and securities bought under it are held as collateralCorrect
  2. BAny client can lend securities to the broker without a written agreement
  3. CMTF can be offered on any security regardless of its eligibility for trading in the F&O segment or the stock's liquidity
  4. DThe broker may use the client's fully paid securities for its own proprietary trades

Explanation

MTF is permitted only for eligible brokers who meet the net worth and other conditions, and securities purchased under MTF are kept as collateral by the broker. Eligible stocks are restricted by exchange criteria, and using clients' securities for proprietary purposes is prohibited.

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