NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Settlement Process
Which of the following is a purpose of the settlement guarantee fund maintained by a clearing corporation?
The settlement guarantee fund is kept by the clearing corporation to absorb losses and ensure settlement is completed when a clearing member defaults on its obligations. It is not used for paying brokerage, lending margin funds to clients, or serving only as an investor education budget.
- ATo pay brokerage to trading members
- BTo meet shortfalls when a clearing member defaults on settlement obligationsCorrect
- CTo fund investor education campaigns exclusively
- DTo provide margin loans to retail clients
Explanation
The settlement guarantee fund (core SGF) is built from contributions by the clearing corporation, exchange and members, and is used to cover losses arising from member defaults so settlement is completed. It is not for brokerage, loans to clients or only for awareness programmes.
Did you get it right without looking?
One question tells you little. A timed set on Settlement Process shows your real accuracy, how long you take and where you lose marks.
More Settlement Process questions
- Which statement about the role of a clearing corporation as the central counterparty (CCP) in settlement is correct?
- A broker receives a client's securities pay-out into its pool account on settlement day. Under SEBI's rules on handling client securities, w…
- A broker's pay-in obligation to the clearing corporation for a settlement is determined on which basis?
- A clearing member fails to deliver the securities for a sale in the equity cash segment on the pay-in day, and the shortage cannot be met. W…
- In the Indian equity cash market, trades in the normal rolling segment are settled on which basis under the current SEBI framework (T+1 sett…
- In the Indian equity cash market, the standard rolling settlement cycle for trades is currently: