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

Which statement best describes the role of a custodian in the securities market as a participant supporting institutional trades?

A custodian safekeeps securities for institutional clients such as FPIs and mutual funds and handles confirmation and settlement of their trades. It does not match orders, issue securities, or rate instruments, which are done by the exchange, issue intermediaries and rating agencies respectively.

  1. AIt safekeeps securities and settles trades on behalf of institutional clients after confirming the trade detailsCorrect
  2. BIt matches buy and sell orders on the exchange trading screen
  3. CIt issues securities to the public on behalf of the company
  4. DIt rates the debt instruments of issuers

Explanation

Custodians hold securities in safekeeping and handle confirmation and settlement of trades for clients such as FPIs and mutual funds. Order matching is done by the exchange system, issuance by merchant bankers and registrars, and rating by credit rating agencies.

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