NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Market Participants in the Securities Market
Which of the following entities is primarily responsible for guaranteeing the settlement of trades executed on a stock exchange in India, by interposing itself between the buying and selling members?
The clearing corporation guarantees settlement of exchange trades. It becomes the central counterparty through novation, acting as buyer to every seller and seller to every buyer, so each member is protected from the default of the other side of the trade.
- ARegistrar and Transfer Agent
- BClearing corporationCorrect
- CDepository Participant
- DCustodian
Explanation
A clearing corporation acts as the central counterparty by novation, becoming the seller to every buyer and buyer to every seller. This guarantees settlement. An RTA maintains issuer records, a DP serves demat account holders, and a custodian safekeeps securities for institutions.
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