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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Market Participants in the Securities Market

Which of the following is the primary function of a custodian serving an institutional client such as a foreign portfolio investor trading in Indian markets?

A custodian safeguards the institutional client's securities and settles its trades, including confirming trades with the broker and handling delivery and payment. It does not execute orders, underwrite issues or rate securities.

  1. AExecuting buy and sell orders on the exchange
  2. BSafekeeping securities and settling trades on behalf of the clientCorrect
  3. CUnderwriting public issues of the client
  4. DRating the securities held by the client

Explanation

Custodians hold securities in safekeeping and handle trade confirmation and settlement for institutional clients, with the broker executing trades. Underwriting is done by merchant bankers and rating by credit rating agencies, so those options misdescribe the custodian's role.

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