NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Clearing and Settlement System
Which of the following best describes the purpose of the Settlement Guarantee Fund (SGF) maintained by a clearing corporation?
The Settlement Guarantee Fund is meant to cover losses from a clearing member's default so that the clearing corporation can complete settlement and honour its guarantee, not to compensate for normal market price movements.
- ATo cover losses arising from a clearing member's default so settlement can be completedCorrect
- BTo pay brokerage to trading members
- CTo fund new product launches
- DTo compensate investors for market price falls
Explanation
The SGF is built from member contributions and clearing corporation funds to ensure settlement obligations are met if a member defaults. It does not protect against ordinary market losses or fund operations.
Did you get it right without looking?
One question tells you little. A timed set on Introduction to Clearing and Settlement System shows your real accuracy, how long you take and where you lose marks.
More Introduction to Clearing and Settlement System questions
- In the Indian equity derivatives market, which entity interposes itself between the buyer and the seller after a trade is executed, becoming…
- A trader sells 3 lots of index futures (lot size 50) at 22,000. The next day's daily settlement price is 22,120. On the following day he squ…
- A clearing member has two clients. Client A has a net long position of 600 units and client B has a net short position of 400 units in the s…
- A clearing member has two clients. Client A is long 4 lots and client B is short 3 lots of the same stock future in the same expiry. Under t…
- A trader sold 3 lots of a stock option with a lot size of 400 at a premium of ₹12. The option is exercised at expiry by the buyer, and the s…
- Stock options on individual securities in India, upon expiry, are currently settled in which manner?