NISM-Series-VII: Securities Operations and Risk Management Questions And Answers
Q1
Which of the following best describes the term “Private Placement”?
Correct Answer:
Issue made to select group of people
Q2
State which of these statements is true?
Correct Answer:
Call Option gives the buyer the right but not the obligation to buy the underlying asset
Q3
Interest rate futures trading is based on ______________________.
Correct Answer:
Notional 10 year coupon bearing GOI security
Q4
Derivative contracts expire on the ___________________.
Correct Answer:
Last Thursday of the expiry month
Q5
ADRs are ______________________.
Correct Answer:
Negotiable instruments denominated in dollars and issued by US depository Banks
Q6
Stock brokers need to get registered as stock brokers with SEBI as per which regulation?
Correct Answer:
SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992
Q7
Securities Contracts (Regulation) Act, 1956 has regulatory jurisdiction over
Correct Answer:
Listing of securities on stock exchanges
Q8
Direct Market Access facility is introduced for __________________.
Correct Answer:
Institutional Clients only
Q9
Page 1 of 7
Which of the statement is false?
Correct Answer:
The order can be entered of buy or sell irrespective of whether the client has sufficient balance of funds or securities in his account
Q10
A contract note is __________________________.
Correct Answer:
Confirmation of trade done during the particular day with all details of which securities have been bought or sold, at price etc
Q11
Risk containment measures includes which of the following:
Correct Answer:
Checking Margin requirements
Q12
SPAN method of calculating margin requirement is for trades done _________________.
Correct Answer:
On the Futures and Options Segment
Q13
The process of original trade being cancelled and the clearing agency taking over as counterparty to all trades is called ____________________
Correct Answer:
Novation
Q14
Clearing members need to take membership with the ___________________.
Correct Answer:
Clearing Agencies
Q15
What kind of accounts is used to receive shares from selling clients and to send shares to buying clients?
Correct Answer:
Pool
Q16
In case of sale of securities, what instruction should be given to the DP, upon receipt of intimation of execution of trade from broker with whom he maintains the demat account.
Correct Answer:
Debit
Q17
Corporate action adjustments are done on all _____________ positions
Correct Answer:
Open
Page 2 of 7
Q18
What is the action taken when there is a failure on part of the broker to deliver the securities?
Correct Answer:
Auction
Q19
Who is the backbone of the securities market?
Correct Answer:
Investors
Q20
Arbitration aims at ________ legal resolution for the disputes.
Correct Answer:
Quicker
Q21
The Exchanges have a panel of arbitrators that consists of member brokers of the exchange and non-members in the ratio of ______.
Correct Answer:
40 member brokers and 60 non members
Q22
Arbitration for claims up to Rs. ___ lakh is decided by a sole arbitrator.
Correct Answer:
25
Q23
________ is a process by which a company offers shares for sale to public for the first time.
Correct Answer:
IPO
Q24
ASBA is the acronym for________________.
Correct Answer:
Application Supported by Blocked Amount
Q25
The facility for modification of mutual fund order does not include_______________
Correct Answer:
All of the above
Q26
What is the non-refundable application fee to be paid to SEBI for registration or renewal of as a portfolio manager?
Correct Answer:
Rupees one lakh
Page 3 of 7
Q27
In case of stop order, the clients needs to mention which price?
Correct Answer:
Trigger Price & Limit Price
Q28
The settlement process is carried out by ______
Correct Answer:
Clearing Corporations
Q29
Who is the key regulator in the Capital market in India?
Correct Answer:
SEBI
Q30
IGRC is the acronym for ___________
Correct Answer:
Investor Grievance Redress Committee
Q31
Depositories Act, 1996 describes DP as _____ of the depository
Correct Answer:
Agent
Q32
KYC requirement is in accordance with the _________
Correct Answer:
SEBI prescribed guidelines
Q33
Who regulates the Pension Sector in India
Correct Answer:
PFRDA
Q34
What is the investment limit for Retail Investors?
Correct Answer:
2 Lakh
Q35
Which Act defines "Stock Exchange"?
Correct Answer:
Page 4 of 7
SCRA
Q36
Client Wise Funding Report has to be submitted within _______ from the end of the month
Correct Answer:
7 Days
Q37
Which of the following statement is false?
Correct Answer:
Trading cum clearing members can trade and clear trades done by him, but cannot trade and clear trades done by others
Q38
State which of the following is true
Correct Answer:
Failure to maintain and furnish documents as prescribed under various rules and regulation may attract penalty upto Rs. 1 crore
Q39
Initial Margin is calculated on what basis?
Correct Answer:
Portfolio Basis
Q40
The settlement cycle of equities currently followed in Indian Securities Markets is __________.
Correct Answer:
T+1
Q41
Financial Instruments which have a maturity period of ______ are known as Money Market Instruments.
Correct Answer:
One year or less
Explanation:
Money market is a market for financial assets that are close substitutes for money. Such financial instruments are also known as cash equivalents. It is a market for short term funds and instruments
having a maturity period of one or less than one year.
Q42
In case of a Trading Member / Stock Broker, the operational risk includes :
Non Delivery of Shares
Trading Errors
Non Payment by clients
All of the above
Correct Answer:
All of the above
Page 5 of 7
Explanation:
Operational risk is the risk of losing money due to inadequate internal processes, people and systems or external events.
For the stock broker, operations risk is essentially risks such as non-payment, non-delivery of scrip, denial of matched order by clients, trading errors, and sudden closure of banks where funds are
deposited.
Q43
Order Management consists of :
Order entering
Order modifications
Order Matching
All of the Above
Correct Answer:
All of the above
Explanation:
Order management consists of entering orders, order modification, order cancellation and order matching
Q44
A Stock Broker cannot provide Portfolio Management Services but can only do brokerage activities —
State whether True or False ?
Correct Answer:
FALSE
Explanation:
Stock brokers also offer Portfolio Management Services (PMS) to their clients. For this, a PMS license has to be obtained by them. PMS is normally offered to High Networth Individuals (HNIs).
Here the stock broker makes the investment decision on behalf of the client and manages his portfolio. The portfolio manager decides the mix of securities that the investor will invest in. Portfolio is updated
‘with new stocks replacing existing stocks as and when required to optimize performance
Q45
Clearing and settlement are Office functions.
Correct Answer:
Back
Explanation:
Placing of Order, Order matching and its conversion into trade are Front Office functions.
Risk management and routing of order are Middle Office functions
Clearing and settlement are Back Office functions
Q46
The orders which come in the order book are all orders.
Correct Answer:
Active
Explanation:
All orders come as active orders into the order book. If they get a match they will be executed immediately, else they will be entered into the order book according to price and time as passive orders.
Q47
Page 6 of 7
For an order which is partially executed, it can be modified to the extent it is -
Correct Answer:
Not Executed
Explanation:
All orders can be modified or cancelled during the trading hours and pre-open market stage provided they are not fully executed.
For the orders, which are partially executed, only the open or unexecuted part of the order can be cancelled / modified.
Q48
An Entity / Broker who wishes to provide depository services to investors has to get registered with SEBl as ______
Correct Answer:
Depository participant
Explanation:
Many brokers also provide depository services to investors amongst other services. To provide these services, the broker or the trading member has to get registered as a depository_participant of a
depository as per the SEBI Act 1992 and the Depositories Act of 1996.
Q49
If on the auction day, there are no sellers (non-delivery) for a particular short delivery, the Clearing Corporation will close-out the deal at ______
Correct Answer:
Whichever is higher from the above
Explanation:
Whenever there is short delivery of securities, Clearing Corporation/ Clearing House will conduct auction to buy the shares from the market participants. If on the auction day, there are no sellers for a
particular short delivery, the Clearing Corporation / Clearing House will then carry out a process called “Close out”.
In this process, the buyer is compensated by paying the value of the short delivered security at the highest price prevailing across the stock exchange from the day of trading till the auction/close out day
or 20% above the official closing price on the auction day, whichever is higher.
Q50
A portfolio manager has to mandatorily appoint a ______ in respect of securities managed or administered by it.
Correct Answer:
Custodian
Explanation:
As per SEBI (Portfolio Managers) Regulations - General Responsibilities of a Portfolio Manager : Every Portfolio manager has to appoint a
custodian in respect of securities managed or administered by it.
Page 7 of 7
