NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Securities Market
Which of the following best describes the role of a stock exchange's clearing corporation in a trade?
The clearing corporation becomes the central counterparty to every trade through novation, acting as seller to the buyer and buyer to the seller, and guarantees settlement. Holding demat securities is a depository function, not the clearing corporation's.
- AIt acts as the counterparty to each trade, guaranteeing settlement through novationCorrect
- BIt issues the securities to the public on behalf of the company
- CIt rates the credit quality of the issuer
- DIt holds investors' shares in dematerialised form
Explanation
The clearing corporation interposes itself between buyer and seller through novation, becoming the central counterparty and guaranteeing settlement. Holding demat shares is the depository's role; rating is by credit rating agencies; issuance involves merchant bankers and registrars.
Did you get it right without looking?
One question tells you little. A timed set on Introduction to Securities Market shows your real accuracy, how long you take and where you lose marks.
More Introduction to Securities Market questions
- Which statement about the T+1 rolling settlement cycle in Indian equity markets is correct?
- Under the Indian rolling settlement system for equity cash market trades, the standard settlement cycle is:
- An investor buys 200 shares at Rs 150 each under the rolling settlement on a Monday (T day). Under the standard T+1 rolling settlement cycle…
- An investor buys 200 shares at ₹500 and sells them the same day, on a stock exchange, at ₹510. Ignoring all charges, which statement correct…
- Which entity in the Indian securities market guarantees the settlement of trades executed on a stock exchange by acting as the counterparty …
- A research analyst notes that a company's IPO was priced at ₹250 per share through book building with a price band of ₹240 to ₹250. Which st…