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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Legal and Regulatory Environment

Under the SEBI framework for exchange-traded equity derivatives, which of the following is a requirement for a clearing member's liability to the clearing corporation?

A clearing member is liable to the clearing corporation for the trades it clears and settles, including those of its trading members and their clients. Its responsibility is not restricted to proprietary trades or to any value threshold.

  1. AA clearing member is liable for trades of its trading members and their clients that it clears and settlesCorrect
  2. BA clearing member is liable only for its own proprietary trades
  3. CA clearing member has no liability once a trade is novated
  4. DA clearing member is liable only for trades above Rs 1 crore

Explanation

A clearing member clears and settles trades on behalf of its trading members and their constituents, and is responsible to the clearing corporation for these obligations. Limiting liability to proprietary trades is wrong because clearing members also clear for others.

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