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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Legal and Regulatory Environment

Which of the following statements about the position limits and disclosure regime for derivatives in India is most accurate?

Position limits and disclosure requirements exist to control excessive speculation and concentration of exposure in the derivatives market. They apply to various categories of participants, not just foreign investors, and disclosure obligations do not depend on whether the position is making a loss.

  1. APosition limits and disclosure requirements are set to curb excessive speculation and market concentrationCorrect
  2. BThere are no position limits for any category of participant
  3. CPosition limits apply only to foreign investors
  4. DDisclosure is required only when the position is a loss

Explanation

Regulators prescribe client, member and market-wide limits with disclosure requirements to prevent concentrated exposures and excessive speculation. The limits are not absent, not only for foreign investors, and disclosure is unrelated to profit or loss.

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