Ncfm - Capital Market Dealer's Module Quiz

The explanation for the correct answer "True" is that the NSCCL (National Securities Clearing Corporation Limited) acts as a central counterparty between the counterparties involved in trades. It helps to streamline the process by netting the positions, meaning that it calculates the overall position of each member and determines their net obligation to either receive or deliver a security. Additionally, it ensures that the necessary funds are either paid or received by the member. Therefore, the statement is true.

On Line Backup is a feature that allows users to create a backup of all their order and trade related information. This means that users can save their data in case of any system failures or data loss. The statement is true because On Line Backup provides users with the ability to protect their important information and ensure its availability even in the event of unexpected circumstances.

The given statement is true because it states that passing an online examination under NSE's Certification in Financial Markets (NCFM) is one of the requirements for admission to membership on the NSE. This implies that individuals who want to become members of the NSE need to successfully complete the NCFM certification exam.

According to the given statement, a person cannot be admitted as a trading member of a recognized stock exchange if they have been adjudged bankrupt or a receiver order in bankruptcy has been made against them, or if they have been proved to be insolvent even if they have obtained their final discharge. This implies that the statement is true, as it states a condition that must be met for someone to be admitted as a trading member.

The statement is true under the Code of Conduct Guidelines prescribed under SEBI (Stock Brokers & Sub-brokers) Regulations, 1992. According to these guidelines, a stock-broker is prohibited from encouraging sales or purchases of securities solely for the purpose of generating brokerage or commission. This ensures that stock-brokers prioritize the best interests of their clients rather than their own financial gain.

The given statement is true. Security wise User Order Quantity Limit (SUOQL) can be modified anytime during trading hours. This means that users have the flexibility to adjust their order quantity limit as per their requirements and market conditions. This allows them to effectively manage their trading activities and mitigate risks.

The statement is true because trading members are required to keep the dematerialised securities of constituents in a separate beneficiary account from their own dematerialised securities. This ensures that the securities of constituents are not mixed with the trading members' own securities and helps maintain transparency and accountability in the trading process.

A user can simultaneously view a regular inquiry (e.g. MBP) and the Snap Quote display on the trading screen. This means that the user can have both the regular inquiry and the Snap Quote display open at the same time, allowing them to view both pieces of information simultaneously.

Penalties are charged to members for all of the above reasons. This means that members can be penalized for failing to fulfill their funds obligations, failing to fulfill their securities deliverable obligations, and for margin shortages. In other words, any failure to meet their financial and contractual obligations can result in penalties being imposed on members.

The correct answer is "all of the above." This means that a trading member can be considered guilty of un-businesslike conduct if they engage in any of the mentioned acts or omissions. These acts include transacting business in fictitious names, making fictitious transactions, and circulating rumors.

The Message Window in the NEAT system allows a user to view messages broadcast by the Exchange such as corporate actions, market news, and auctions related information. This means that all of the given options are correct and can be viewed in the Message Window.

The maximum user order value that can be set for the new user is Rs. 250 lakh. This is because the trading member has set the branch order value for Kolkata branch to be Rs. 800 lakh, and there is already one user 'Z' with a user order value limit of Rs. 550 lakh. Since the branch order value is not unlimited for Kolkata branch, the new user cannot have a user order value limit higher than the remaining branch order value, which is Rs. 250 lakh.

This statement is true. The Auction Square Up Debit Statement provides information about unauctioned deliveries that are squared-up by the Exchange. It is a report that gives details about these transactions, confirming that the statement is accurate.

The maximum brokerage payable is Rs. 5,000 because the brokerage is usually charged as a percentage of the transaction value. In this case, the client is buying and selling shares worth Rs. 1,00,000, so the brokerage fee would be a percentage of this amount. If the brokerage percentage is 5%, then the brokerage payable would be Rs. 5,000 (5% of Rs. 1,00,000). Therefore, Rs. 5,000 is the maximum brokerage payable in this scenario.

A trading member can be deemed guilty of misconduct if they fail to submit their audited accounts to the Exchange, pay their subscription, fees, arbitration charges, or any other money due to the exchange, or if they submit false or misleading statements in their clearing forms. These actions or omissions go against the expected standards and responsibilities of a trading member and can be considered as misconduct.

The National Securities Clearing Corporation Ltd. (NSCCL) assumes the counterparty risk of each member and guarantees financial settlement. This means that if a member fails to fulfill their financial obligations, NSCCL will step in and ensure that the settlement is completed. This provides a level of security and confidence to the members of the clearing corporation. SEBI is the Securities and Exchange Board of India, which is the regulatory body for the securities market in India. Central Depository Services Ltd. (CDSL) and The National Depository Services Ltd. (NSDL) are depository organizations that facilitate the holding and transfer of securities in electronic form.

The correct answer is Disclosed Quantity (DQ). When an order has the Disclosed Quantity attribute, it means that only a portion of the total order quantity is revealed to the market. The remaining quantity is kept hidden. This allows traders to disclose a specific quantity to the market while keeping the rest of their order size confidential. By using the DQ attribute, traders can control the amount of information they reveal to the market, which can be useful in certain trading strategies.

The branch manager receives End of Day reports for all the dealers under that branch. This means that the reports include information from all the dealers who work under the same branch as the manager.

When the user invokes the order entry screen, all of the fields, including Symbol, Series, and Book Type, are taken as default values. This means that when the user opens the order entry screen, these fields will already have pre-filled values, which can be modified if needed.

The maximum user order value that can be set for the new user is Rs. 250 lakh. This is because the Mumbai branch has a total branch order value of Rs. 950 lakh, and the existing users 'X' and 'Y' have order value limits of Rs. 300 lakh and Rs. 400 lakh respectively. Therefore, the remaining order value that can be allocated to the new user is Rs. 250 lakh.

The statement is true because when clients are introduced by an authorized person to a trading member, they are required to deliver securities and make payments directly in the trade name of the trading member. This means that the clients cannot make the transactions in their own name but must use the trading member's name.

An order with a Disclosed Quantity (DQ) is a volume related order condition. This means that when placing the order, the trader specifies the minimum quantity that should be displayed to the market. The remaining quantity is kept hidden. This allows the trader to disclose only a certain portion of the total order volume, while keeping the rest undisclosed.

The status 'P' in the 'Auction Inquiry' screen in the NEAT system indicates that the auction is pending and yet to begin.

Settlement for the purchase of shares typically takes place on T+2, which means two business days after the trade date. In this case, the shares were purchased on Monday (T), so the settlement would occur on Wednesday (T+2).

In the 'Activity Log' screen in the NEAT system, 'OM' indicates an activity of 'Order Modified'. This means that there has been a change or modification made to an existing order in the system. It could be a change in the quantity, price, or any other parameter of the order. This activity log helps in tracking and monitoring the changes made to orders for better transparency and record-keeping.

The statement is true. The stamp duty on transfer of demat securities has been waived, meaning that there is no longer a fee or tax imposed on the transfer of securities held in dematerialized form. This is a beneficial development for investors as it reduces the cost associated with transferring securities and encourages more trading activity in the market.

The Securities Delivered Statement provides information on all of the above options, including the delivering centre, the total number of shares to deliver for each security, and the quantity delivered and quantity of shares delivered short. This statement is comprehensive and includes all relevant information regarding the delivery of securities.

The maximum allowable price at which the member can put a sell order in the auction for PQR is Rs. 316.80. This is calculated by applying the price band of +/- 20% to the previous day's close price of Rs. 264.00. Adding 20% to Rs. 264.00 gives Rs. 316.80, which is the maximum allowable price.

FIIs, or Foreign Institutional Investors, do not issue securities in the primary market. The primary market is where new securities are issued and sold for the first time, typically through an initial public offering (IPO) by companies or government entities. While companies and state governments issue securities in the primary market to raise capital, FIIs are institutional investors from foreign countries who invest in securities already issued in the market. They do not directly participate in the issuance of new securities.

When a recognized stock exchange refuses to list the securities of a company, the company has the right to know the reasons for the refusal. In such cases, the company can appeal to the Securities Appellate Tribunal (SAT) against the stock exchange's decision. SAT is an appellate body that hears and resolves appeals related to securities market regulations. Therefore, SAT is the appropriate authority for the company to approach and challenge the stock exchange's refusal to list their securities.

If the security has not been traded on a particular day, the latest available closing price at the NSE is to be considered as the closing price. This means that if there is no trading activity for a security on a specific day, the closing price from the most recent day where trading occurred will be used as the closing price for that day. This ensures that there is still a closing price available for the security, even if there was no trading activity on a particular day.

During the period of Surveillance and Control (SURCON) after market close, users are only allowed to have inquiry access. This means that they can view and gather information about the market and their own trades, but they do not have the ability to enter new orders, cancel trades, or modify existing trades. This restriction is put in place to ensure that the market remains stable and secure during this time when trading is not actively taking place.

The VaR (Value at Risk) margins for liquid securities are based on the volatility of the security. Volatility refers to the degree of variation or fluctuation in the price or value of a security over time. Higher volatility indicates greater potential for price swings, which increases the risk associated with the security. Therefore, using volatility as a basis for VaR margins helps to account for the potential losses that may occur due to price fluctuations in liquid securities.

Security sigma refers to the volatility of a security. Volatility measures the degree of variation in the price of a security over time. It indicates the level of risk associated with the security, with higher volatility indicating higher risk. Therefore, the correct answer is "volatility" as it aligns with the definition and meaning of security sigma.

Odd lots can be traded in the Limited Physical Market. Odd lots refer to a number of shares that is less than the standard trading unit or board lot. These odd lots are usually considered less liquid and may have difficulty finding buyers or sellers in the regular market. Therefore, a separate market, known as the Limited Physical Market, allows for the trading of odd lots. In this market, investors can buy or sell odd lots of shares, which provides them with the opportunity to trade smaller quantities that may not be available in the regular market.

The pre-set Market price protection percentage is set to 5% of the Last Traded Price (LTP). This means that if the LTP of a stock is $100, the market price protection will ensure that the stock cannot be traded at a price lower than $95 (5% lower than the LTP). This protection mechanism helps prevent sudden and drastic price drops, providing a certain level of stability and security for investors.

At the end of the trade cycle, the trades are "netted" to determine the obligations of the trading members to deliver securities/funds as per the settlement schedule. Netting refers to the process of offsetting the buy and sell transactions of the trading members to determine the net position, which reduces the overall number of transactions and simplifies the settlement process.

Order no. 1 will get a priority for getting executed because it entered into the system first, at 10:30 a.m., while Order no. 2 entered at 10:31 a.m. Since both orders have the same price, the order that enters the system first is given priority.

The upfront margin rate applicable for all securities in the Trade for Trade (TT) segment is 100%. This means that traders are required to deposit 100% of the value of the securities they wish to trade as margin before placing the trade. This ensures that there is sufficient collateral to cover any potential losses in the trade.

A custodian in NSCCL is a clearing member but not a trading member. A custodian is responsible for holding and safeguarding assets on behalf of clients. They do not engage in trading activities but instead focus on the safekeeping and administration of securities. Custodians play a crucial role in the clearing and settlement process by ensuring the smooth transfer of securities between trading members and maintaining accurate records of ownership.

Trading members can submit Fixed Deposit Receipts (FDRs) issued by approved banks as additional base capital to NSCCL. This means that FDRs can be used as a form of collateral or security to increase the capital base of trading members.

In a stock exchange, the priority for order execution is typically determined by the time of entry into the system. The order that arrives first has higher priority.



In the given scenario:



1. The first buy order is for 200 shares at Rs. 72.75, entered at 10:30 a.m.

2. The second buy order is for 300 shares at Rs. 72.80, entered at 10:31 a.m.



Since the first order was entered into the system at an earlier time (10:30 a.m.), it will have a higher priority for execution compared to the second order entered at a later time (10:31 a.m.).



Therefore, the order with 200 shares at Rs. 72.75, entered at 10:30 a.m., will get priority for execution over the order for 300 shares at Rs. 72.80, entered at 10:31 a.m.

The correct answer is "index-based market-wide circuit breakers". This means that the NSE (National Stock Exchange) has implemented circuit breakers that are triggered based on the movement of the overall market index. These circuit breakers are designed to temporarily halt trading in the event of significant market declines in order to prevent panic selling and provide time for investors to reassess their positions.

False. An advertisement released by a trading member cannot contain a recommendation regarding the purchase or sale of any particular share or security of any company.

Institutional transactions are identified by the use of the participant code at the time of order entry. This code helps to distinguish and track transactions made by different participants within an institution. It is used to ensure accurate and efficient processing of orders and to maintain a record of the transactions made by each participant.

AUI in the Full Message window in the NEAT system indicates Auction Initiation Messages. This means that the messages displayed in the Full Message window are specifically related to initiating auctions.

The principle described in the question is called "novation." Novation refers to the substitution of a new party or obligation for an existing one. In this case, NSCCL becomes the legal counterparty to the net settlement obligations of every member, replacing the original parties involved.

Order no. 2 will get a priority for getting executed because it was entered into the system later than order no. 1. In a first-come-first-serve system, the order that is entered first has a higher priority for execution. Therefore, since order no. 2 was entered at 10:31 a.m., after order no. 1 was entered at 10:30 a.m., it will have a higher priority and will be executed first.

In the context of the question, a solicitor is someone who actively participates in the Exchange initiated auctions by entering orders. The other options, participant and initiator, do not accurately describe the role of the trading members in these auctions. Therefore, the correct answer is solicitor.