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

Under the SEBI margin trading framework, which of the following is a requirement for a stock broker providing the margin trading facility to clients?

Only securities from the exchange-specified eligible list of liquid stocks can be bought under margin trading. Clients must still pay upfront margin, and the broker cannot use client securities without proper authorisation, so the other statements breach the SEBI framework.

  1. AOnly securities from the specified eligible list of stocks can be purchased under the facilityCorrect
  2. BClient can use the facility for any security including unlisted shares
  3. CBroker can fund it using the client's fully paid unencumbered securities without any authorisation
  4. DBroker need not collect any initial margin from the client

Explanation

Margin trading is permitted only in liquid, eligible stocks specified by the exchanges (Group I stocks that meet criteria). Clients must pay upfront margin, and securities cannot be used without proper authorisation or pledge. Hence the other options violate the framework.

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