NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Settlement Process
Which statement about the Settlement Guarantee Fund (SGF) maintained by a clearing corporation is correct?
The Settlement Guarantee Fund is a corpus kept by the clearing corporation to cover shortfalls when a clearing member defaults, so that settlement can still be completed. It is not an investor compensation pool or a brokerage fund, and it applies to the cash segment as well.
- AIt is used to meet shortfalls arising from a clearing member's default so that settlement is completedCorrect
- BIt is a fund contributed solely by investors to compensate for market losses
- CIt is used to pay brokers' brokerage commissions
- DIt exists only for the derivatives segment
Explanation
The SGF is a corpus held by the clearing corporation to complete settlement when a clearing member defaults. It is built from contributions of the clearing corporation, members and penalties, not just investors. It exists for the cash segment too, and is not meant for paying brokerage.
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
- A clearing member fails to deliver shares on the securities pay-in day for a sale made by its client. Which mechanism does the exchange use …
- A clearing member's client sold 500 shares through a broker. The shares were not delivered to the clearing corporation by the pay-in deadlin…
- Broker A has a net pay-in obligation. Which of the following correctly describes the funds pay-in and securities pay-in for a normal-segment…
- Which of the following best describes the role of the clearing corporation in guaranteeing settlement of trades on a recognised stock exchan…
- Which of the following best describes the role of the clearing corporation as a central counterparty in settlement of exchange-traded trades…
- A broker has a net obligation in a stock on a trade date: it bought 3,000 shares at Rs 200 in one trade and sold 1,800 shares at Rs 210 in a…