NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Clearing Process
Which of the following is a function of the clearing corporation's settlement guarantee fund (SGF) maintained for each segment?
The settlement guarantee fund is used to cover shortfalls caused by a clearing member's default, so that the settlement obligations to other members are still honoured. It is a safeguard that supports the clearing corporation's guarantee of trades and has nothing to do with brokerage or marketing.
- ATo pay brokerage commission to trading members
- BTo meet shortfalls arising from a clearing member's default so that settlement obligations to others are honouredCorrect
- CTo fund the exchange's marketing expenses
- DTo refund IPO application money to investors
Explanation
The settlement guarantee fund is a pool built from member deposits and the clearing corporation's contributions to guarantee settlement. It is used when a clearing member defaults so that other members receive their dues. It has no role in brokerage, marketing or IPO refunds.
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