NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Market Participants in the Securities Market
Which statement about a custodian in the securities market is correct?
A custodian safekeeps securities and handles the confirmation and settlement of trades for institutional clients such as mutual funds and foreign portfolio investors. It does not place orders, guarantee settlement or act as an issue registrar, which are broker, clearing corporation and registrar functions.
- AA custodian places buy and sell orders on the exchange on behalf of retail investors
- BA custodian safekeeps securities and confirms and settles trades of institutional clientsCorrect
- CA custodian guarantees settlement of all trades on the exchange
- DA custodian acts as the issuer's registrar for IPO applications
Explanation
Custodians hold securities in safekeeping and handle confirmation and settlement of trades for institutional clients such as FPIs and mutual funds. Order placement is a broker function, settlement guarantee belongs to the clearing corporation, and IPO registry work belongs to registrars.
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