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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Sales Practices and Investors Protection Services

Which of the following best describes the purpose of the exchange's investor protection fund in the derivatives segment?

The investor protection fund compensates investors, up to a prescribed limit, for admitted claims when a defaulting or expelled member's own assets are insufficient. It does not guarantee trading profits, subsidise brokerage or provide margin for clients.

  1. ATo guarantee profits to investors trading in futures
  2. BTo compensate clients up to a specified limit when a defaulting member's assets are insufficient to meet admitted claimsCorrect
  3. CTo fund the brokerage of small investors
  4. DTo pay margin on behalf of retail clients

Explanation

The Investor Protection Fund is maintained by exchanges to compensate investors of a defaulter or expelled member up to prescribed limits when the member's assets fall short. It does not guarantee profits, pay brokerage or fund margins.

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