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NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to the Indian Capital Market

Under the Indian capital market structure, which of the following correctly distinguishes a depository from a clearing corporation in the settlement of an equity trade on an exchange?

The clearing corporation computes members' obligations and guarantees settlement, while the depository transfers securities between demat accounts through book entries. They are separate entities with distinct roles, and the other options wrongly reverse or merge those functions.

  1. AThe clearing corporation determines and guarantees the funds and securities obligations of members, while the depository effects the transfer of securities between demat accountsCorrect
  2. BThe depository guarantees settlement of trades, while the clearing corporation maintains investors' demat accounts
  3. CBoth perform identical functions and are the same entity in India
  4. DThe depository determines members' obligations, while the clearing corporation holds securities in electronic form

Explanation

A clearing corporation nets obligations, acts as counterparty and guarantees settlement through its settlement guarantee fund. The depository holds securities in dematerialised form and moves them between accounts upon settlement instructions. The other options reverse or merge these roles.

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