NISM SERIES VII: Securities Operations & Risk Management Mock Test – Free Demo

Explanation:

SEBI, the Securities and Exchange Board of India, is the regulatory authority established with statutory powers to protect the interests of investors in securities, promote the development of the securities market, and regulate the securities market. It ensures fair practices, transparency, and efficiency in the market, thereby safeguarding investor interests, fostering market development, and maintaining market integrity.

Explanation:

Cross-margining benefit is applicable to all the positions mentioned in options (i), (ii), (iii), and (iv). This benefit allows traders to offset positions in one segment against positions in another segment, thereby reducing the margin requirement. This helps in efficient capital utilization and risk management.

Explanation:

For option contracts that are to be cash settled, the settlement occurs by debiting or crediting relevant clearing accounts of clearing members with the respective clearing bank towards the exercise settlement value for each unit of the option contract. This value represents the cash amount settled between the parties based on the exercise of the option contract.

Explanation:

When a broker requests the Clearing Corporation to deliver securities directly to the purchaser, they typically specify the purchaser’s Demat account. Demat accounts are used for holding securities in electronic form, making them a convenient and secure option for receiving securities. This method ensures efficient and seamless transfer of ownership from the seller to the buyer in the securities market.

Explanation:

In currency futures trading, the last trading day for a futures contract is typically two business days before the expiry date. This allows traders to close out their positions or roll them over to the next contract before the contract expires, ensuring smooth settlement processes and avoiding any potential issues that may arise on the expiry date itself.

Explanation:

Trade enrichment is the process of including additional information in one instruction in a trade that is already being executed. This additional information may include details such as settlement instructions, special conditions, or other relevant data that enriches the trade instruction. It helps ensure that all necessary information is included and processed accurately during the trade execution process.

Explanation:

Partially Convertible Debentures are a type of debentures that can be converted partially into equity shares of the company. This means that a portion of the debenture can be converted into equity shares at a predetermined ratio, while the remaining portion remains as non-convertible debt. This gives investors the option to participate in the company’s equity ownership to some extent while still receiving the benefits of fixed income from the non-convertible portion.

Explanation:

Explanation:

Money market instruments are mostly used by governments, banks, and other corporate entities to meet their short-term fund requirements. This market facilitates the borrowing and lending of short-term funds, typically for periods ranging from overnight to one year. Money market instruments include treasury bills, commercial papers, certificates of deposit, and repurchase agreements, among others. They provide liquidity and flexibility to borrowers and investors seeking short-term funding or investment opportunities.

Explanation:

Close-ended mutual fund schemes are traded on the equity segment of the exchange. These funds have a fixed number of units that are issued through an initial public offering (IPO), and after the IPO, these units are traded on the stock exchange like shares. The price of these units is determined by market demand and supply, and investors can buy or sell them in the secondary market. In contrast, open-ended mutual fund schemes do not trade on the exchange; instead, investors buy or redeem units directly from the mutual fund company at the net asset value (NAV) determined at the end of each trading day.

Explanation:

Clearing accounts are to be used exclusively for clearing and settlement operations. These accounts are designated for the purpose of processing transactions related to clearing and settling trades in financial markets. They facilitate the smooth movement of funds and securities between buyers and sellers during the clearing and settlement process, ensuring timely and efficient completion of transactions.

Explanation:

In September 2005, SEBI permitted stock exchanges to set up a separate trading window called the “Block window.” This window allows for the trading of large block deals or bulk trades, which involve a significant quantity of shares being bought or sold in a single transaction. The block window provides a specialized platform for executing such large trades efficiently while minimizing market impact.

Explanation:

When providing the margin trading facility, brokers must ensure that the exposure to a single client does not exceed 10 per cent of the total exposure of the broker. This limit helps mitigate the risk associated with margin trading by limiting the exposure to any single client, thereby safeguarding the broker’s financial stability and minimizing potential losses in case of adverse market movements.

Explanation:

Stock exchanges typically have limits on the value of orders that can be accepted for execution in the normal market. Any order with a value exceeding Rs.10 crore per order cannot be accepted by the stock exchange for execution in the normal market. This limit helps maintain orderliness and stability in the market by preventing exceptionally large orders from distorting prices or causing disruptions in trading activity.

Explanation:

Foreign Currency Convertible Bonds (FCCBs) are bonds issued by Indian companies but subscribed to by non-residents in foreign currency. These bonds offer the flexibility of being converted into equity shares of the issuing company at a later date, typically at the discretion of the bondholder. FCCBs are a popular instrument for Indian companies to raise funds from international markets while providing investors with the potential for capital appreciation through conversion into equity shares.

Explanation:

An appeal before the appellate panel of arbitrators may be filed within one month from the date of receipt of arbitral award

Explanation:

As per the Securities Contracts (Regulation) Rules (SC(R)R), the register of transactions, also known as the Sauda book, of a stockbroker must be maintained for a period of 5 years. This requirement ensures that comprehensive records of all transactions conducted by the stockbroker are preserved for an extended period, enabling regulatory oversight, audits, and investigations if necessary.

Explanation:

This statement is false because individuals or entities willing to avail themselves of the services of a depository cannot directly approach them. Instead, they must approach a depository participant (DP), who acts as an intermediary between the depository and the clients. DPs are authorized to open accounts and provide depository services to clients on behalf of the depository. Therefore, individuals or entities must approach a DP to access depository services, not the depository directly.

Explanation:

Stock exchanges should comply with SEBI guidelines with regards to the arbitration mechanism. SEBI, the Securities and Exchange Board of India, is the regulatory authority governing stock exchanges and ensuring fair and transparent functioning of the securities markets in India. SEBI provides guidelines and regulations concerning various aspects of stock exchange operations, including arbitration mechanisms for dispute resolution. Compliance with SEBI guidelines ensures that arbitration mechanisms are conducted efficiently and fairly, maintaining investor confidence and market integrity.

Explanation:

Mark-to-market margin (MTM) is collected from the member before the start of the next trading day. This margin is calculated based on the market value of open positions at the end of the trading day and is collected to cover potential losses that may occur if the market moves against the member’s positions. Collecting MTM margin before the start of the next trading day ensures that members maintain sufficient funds to cover their positions and helps mitigate the risk of default in the derivatives market.