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

Which statement about a professional clearing member (PCM) in the equity derivatives segment is correct?

A professional clearing member clears and settles trades executed by trading members and custodial participants, rather than only its own trades. It is a distinct category from self-clearing members and trading-cum-clearing members, and it has no role in framing exchange margin rules.

  1. AIt clears and settles trades executed by trading members and custodial participants but does not itself trade on its own accountCorrect
  2. BIt can only clear its own proprietary trades and none of any client
  3. CIt is the exchange body that frames the margin rules
  4. DIt is a depository participant that only holds client demat accounts

Explanation

A PCM is a clearing member, typically a bank or financial institution, that clears and settles trades for trading members and custodial participants. It is not limited to own trades, which describes a self-clearing member, and it neither sets margin rules nor acts as a DP.

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