Unit ko samjho · NISM Series XVI
Clearing Settlement and Risk Management of Commodity Derivatives
20 questions is unit mein
Sawaal aur jawaab English mein hain, kyunki NISM ka exam paper bhi English mein hota hai.
Is unit mein kya hai
- After a commodity futures trade is accepted for clearing through novation, which entity interposes itself between the two clearing sides?
- A clearing member has a confirmed funds pay-in due today. One of its trading-member clients says its own customer will pay tomorrow. Which statement best describes the clearing member’s obligation?
- A seller keeps an eligible short commodity futures position open through expiry in a contract specified as compulsory physical delivery. Which preparation is required rather than assuming the trade ends only with a price-difference payment?
- A contract permits a specified grain grade with moisture no higher than 12%. A seller tenders the correct quantity, but an accepted assay shows 14% moisture. The contract provides no allowance for this grade. What follows?
- A delivery rule requires an unencumbered electronic warehouse receipt. The seller has enough recorded goods, but the receipt remains pledged to a lender. What must be addressed before this receipt can satisfy the stated condition?
- Which activity is most directly a commodity repository function rather than physical warehouse storage?
- For this question, a delivery invoice uses a base price of ₹1,000 per unit, a 2% quality premium on that base price and a ₹5-per-unit location discount. Ten units are delivered. There are no taxes or other charges. What is the invoice value?
- A long futures position covers 10 units, entered at ₹500 and held for delivery. Cumulative MTM gains of ₹200 have already been received. The delivery rule invoices goods at the final price of ₹520 per unit with no adjustments or charges. How much must be paid for the delivery invoice, before using any separately received MTM cash?
- A client deposits ₹30,000 to open a commodity futures position. An adverse move creates a valid cumulative loss of ₹42,000 before it is closed. Ignoring all other balances, which statement is correct?
- An account has ₹40,000 cash and eligible securities worth ₹1,00,000. For this question, the securities receive a 20% haircut and there are no other eligibility limits. A requirement of ₹1,30,000 must be met. What is the collateral shortfall?
- In a simplified risk illustration, two positions have P&L in ₹thousand as follows: scenario 1 is −20 and +15, scenario 2 is −10 and −12, and scenario 3 is +15 and −10. The risk amount is the worst combined loss among these three scenarios. What is it?
- For this question, an account starts with ₹60,000 cash collateral. A ₹9,000 MTM loss is debited from it, and the required collateral after settlement is ₹65,000. There are no other credits. How much fresh cash is needed to restore the requirement?
- A participant has enough collateral for a futures position outside its delivery period. As the contract approaches physical settlement, the applicable schedule imposes a separate delivery-related margin. Which conclusion is most appropriate?
- A commodity call on futures is exercised and creates a long futures position at its strike. The participant intends to keep that futures position rather than close it immediately. Which risk-management check is now essential?
- For this illustration, margin nets positions within each client but not between clients, at ₹1,000 per residual contract. Client A is long 8 and short 3 contracts in the same contract. Client B is short 5. What is the total margin under this rule?
- A trader suffers a valid loss from a fall in a futures price. No intermediary default or settlement failure has occurred. Which statement about the clearing corporation’s settlement guarantee fund is appropriate?
- A short position is subject to compulsory delivery. A seller says it can simply choose to pay a delivery-default penalty instead of arranging the required goods, even though no such alternative is granted in the contract. Which statement is correct?
- In a hypothetical bilateral commodity transaction outside any protected delivery-versus-payment arrangement, a seller transfers title to all goods but the buyer then fails to pay. Which exposure is illustrated most directly?
- For this question, a client’s overall long-position cap is 600 contracts and its near-month cap is 150. It already has 570 long contracts overall, including 110 in the near month. With no offsetting positions, what is the largest additional near-month purchase allowed by both caps?
- A commodity trading platform wants to reduce unauthorised login risk when a user’s password is stolen. Which control most directly addresses that specific risk?
Zaroori ideas
Practice bank se · 1
After a commodity futures trade is accepted for clearing through novation, which entity interposes itself between the two clearing sides?
Novation changes the clearing counterparty structure rather than the grade or economics of the traded contract. The clearing corporation takes the central counterparty role in the clearing arrangement. Warehouses, assayers and index publishers provide other services. They do not replace the clearing corporation merely because the contract concerns physical goods. Remember: Identify the central counterparty separately from trading, storage and quality-testing entities.
Hint Common mistake: Assuming the physical warehouse guarantees every financial obligation of the trade.
XVI-054Practice bank se · 2
A clearing member has a confirmed funds pay-in due today. One of its trading-member clients says its own customer will pay tomorrow. Which statement best describes the clearing member’s obligation?
Settlement obligations at one level of the clearing chain do not automatically change because collection at another level is delayed. The question states that the clearing member has a confirmed pay-in due today. A delay in an underlying customer payment creates a funding or collection problem. It is not itself an agreed change to that settlement obligation. Remember: Track client collections and clearing obligations separately, including their deadlines.
Hint Common mistake: Assuming a chain of unpaid receivables automatically extends a clearing pay-in deadline.
XVI-055Practice bank se · 3
A seller keeps an eligible short commodity futures position open through expiry in a contract specified as compulsory physical delivery. Which preparation is required rather than assuming the trade ends only with a price-difference payment?
An open position in a compulsory-delivery contract carries a physical settlement obligation under the contract’s delivery framework. The contract is expressly described as compulsory physical delivery. A short that remains for delivery must be supported by conforming goods and the required tender/transfer arrangements. Daily does not replace the physical leg. Remember: Check the settlement mode and delivery obligations before carrying a position into .
Hint Common mistake: Assuming every derivatives contract ends through cash settlement alone.
XVI-056Practice bank se · 4
A contract permits a specified grain grade with moisture no higher than 12%. A seller tenders the correct quantity, but an accepted assay shows 14% moisture. The contract provides no allowance for this grade. What follows?
Conforming delivery depends on quality and quantity, as well as the proper transfer of title. The tested moisture content exceeds the stated quality limit. The question explicitly excludes an allowance permitting this grade. A receipt or correct weight cannot cure that failure by itself. Remember: Test every material delivery specification, not only the weight.
Hint Common mistake: Assuming a quality shortfall can always be settled by an improvised discount.
XVI-057Practice bank se · 5
A delivery rule requires an unencumbered electronic warehouse receipt. The seller has enough recorded goods, but the receipt remains pledged to a lender. What must be addressed before this receipt can satisfy the stated condition?
Ownership records and encumbrances matter when transferable goods are used to meet delivery obligations. The receipt’s quantity is sufficient, but it fails the stated unencumbered condition. The recorded pledge must be resolved through the permitted process. Duplicating the receipt or ignoring the lender’s rights does not create valid delivery eligibility. Remember: Check title and encumbrances alongside quality, quantity and location.
Hint Common mistake: Treating an electronic goods balance as automatically free for any transfer.
XVI-058Practice bank se · 6
Which activity is most directly a commodity repository function rather than physical warehouse storage?
The repository manages electronic records of rights in stored goods, while physical handling is performed by other service providers. Electronic receipts need controlled issuance, secure records and authenticated transfers or pledge entries. Storage, weighing and transportation concern handling the goods themselves, not maintaining the repository record. Remember: Distinguish information and title records from physical custody and movement.
Hint Common mistake: Assuming the entity maintaining the electronic receipt also operates every warehouse and truck.
XVI-059Practice bank se · 7
For this question, a delivery invoice uses a base price of ₹1,000 per unit, a 2% quality premium on that base price and a ₹5-per-unit location discount. Ten units are delivered. There are no taxes or other charges. What is the invoice value?
Delivery adjustments must be applied using their specified price base and sign before multiplying by quantity. Quality premium per unit = 2% × ₹1,000 = ₹20. Adjusted unit price = ₹1,000 + ₹20 − ₹5 = ₹1,015. Invoice = 10 × ₹1,015 = ₹10,150. No unstated GST or fee is inserted. Remember: Keep grade, location and tax adjustments separate and use each stated base.
Hint Common mistake: Applying every adjustment in the same direction or forgetting to multiply per-unit adjustments by delivery quantity.
XVI-060Practice bank se · 8
A long futures position covers 10 units, entered at ₹500 and held for delivery. Cumulative MTM gains of ₹200 have already been received. The delivery rule invoices goods at the final price of ₹520 per unit with no adjustments or charges. How much must be paid for the delivery invoice, before using any separately received MTM cash?
A physical delivery invoice and previously settled futures gains are separate cash-flow entries. The invoice rule uses the final price: 10 × ₹520 = ₹5,200. The earlier ₹200 MTM receipt does not change the invoice’s face amount. Considering both cash flows, the economic cost is ₹5,200 − ₹200 = ₹5,000, which equals the initial futures price times quantity. The question asks for the invoice, not that net cost. Remember: Do not confuse an invoice amount with the net economic cost after earlier settlement cash flows.
Hint Common mistake: Deducting previously received MTM twice or omitting the physical payment entirely.
XVI-061Practice bank se · 9
A client deposits ₹30,000 to open a commodity futures position. An adverse move creates a valid cumulative loss of ₹42,000 before it is closed. Ignoring all other balances, which statement is correct?
Futures margin supports performance of obligations. It is not an or a contractual maximum-loss payment. The supplied futures loss is ₹42,000. Initial collateral of ₹30,000 does not alter the payoff formula. Ignoring all other balances, the loss exceeds the deposit by ₹12,000. Settlement and collection consequences depend on applicable arrangements, but the loss is not automatically capped. Remember: Calculate futures losses from price and quantity, not from the size of the initial deposit.
Hint Common mistake: Treating leveraged futures like purchased options with premium-limited loss.
XVI-062Practice bank se · 10
An account has ₹40,000 cash and eligible securities worth ₹1,00,000. For this question, the securities receive a 20% haircut and there are no other eligibility limits. A requirement of ₹1,30,000 must be met. What is the collateral shortfall?
A collateral haircut reduces recognised security value rather than increasing the required cash balance by the same amount automatically. Recognised securities = ₹1,00,000 × (1 − 0.20) = ₹80,000. Total recognised collateral = ₹40,000 + ₹80,000 = ₹1,20,000. Shortfall = ₹1,30,000 − ₹1,20,000 = ₹10,000. Remember: Value each collateral component under its eligibility rule before finding the deficit.
Hint Common mistake: Using market value as collateral value despite an explicitly stated haircut.
XVI-063Practice bank se · 11
In a simplified risk illustration, two positions have P&L in ₹thousand as follows: scenario 1 is −20 and +15, scenario 2 is −10 and −12, and scenario 3 is +15 and −10. The risk amount is the worst combined loss among these three scenarios. What is it?
Portfolio scenario risk adds position results within each common scenario before selecting the worst portfolio loss. Scenario 1 total = −20 + 15 = −₹5 thousand. Scenario 2 total = −10 − 12 = −₹22 thousand. Scenario 3 total = 15 − 10 = +₹5 thousand. The worst combined loss is ₹22 thousand. Combining different positions’ worst outcomes from different scenarios would answer a different question. Remember: Aggregate within each common scenario before choosing the worst result.
Hint Common mistake: Adding each leg’s independently worst loss as though those states necessarily occur together.
XVI-130Practice bank se · 12
For this question, an account starts with ₹60,000 cash collateral. A ₹9,000 MTM loss is debited from it, and the required collateral after settlement is ₹65,000. There are no other credits. How much fresh cash is needed to restore the requirement?
An MTM loss and a changed collateral requirement affect different parts of the funding calculation. After the loss debit, the account has ₹60,000 − ₹9,000 = ₹51,000. The new requirement is ₹65,000. Fresh cash needed = ₹65,000 − ₹51,000 = ₹14,000, including both the loss replacement and ₹5,000 increase in requirement. Remember: Calculate the post-settlement balance before calculating a margin top-up.
Hint Common mistake: Confusing the MTM loss itself with the complete cash amount needed to meet all current requirements.
XVI-131Practice bank se · 13
A participant has enough collateral for a futures position outside its delivery period. As the contract approaches physical settlement, the applicable schedule imposes a separate delivery-related margin. Which conclusion is most appropriate?
Contract-stage changes can add funding requirements distinct from ordinary opening margin and the goods invoice. The scenario expressly states that an additional delivery-related requirement applies. The participant should compare total eligible collateral with all current requirements. It should separately plan any goods or invoice obligation. Remember: Recheck collateral and delivery funding as a contract moves toward expiry.
Hint Common mistake: Assuming the amount sufficient to open a position is sufficient through every later settlement stage.
XVI-132Practice bank se · 14
A commodity call on futures is exercised and creates a long futures position at its strike. The participant intends to keep that futures position rather than close it immediately. Which risk-management check is now essential?
The purchased option’s limited-premium exposure is not the same as the futures position created when it is exercised. The facts state that exercise has created a futures position and that it will remain open. That futures exposure can create later MTM gains or losses and must meet applicable collateral and settlement requirements. An earlier in-the-money option does not freeze subsequent prices. Remember: Follow an option through exercise into the obligations of the instrument it creates.
Hint Common mistake: Applying the purchased option’s maximum-loss description to a futures position retained after exercise.
XVI-133Practice bank se · 15
For this illustration, margin nets positions within each client but not between clients, at ₹1,000 per residual contract. Client A is long 8 and short 3 contracts in the same contract. Client B is short 5. What is the total margin under this rule?
An aggregation rule determines where offsetting is permitted. Economic positions from separate clients are not netted when the rule forbids it. Client A’s residual position is 8 − 3 = 5 long contracts, requiring ₹5,000. Client B has 5 short contracts, requiring another ₹5,000. Add client-level requirements: ₹10,000. Netting the two clients against each other would wrongly produce zero. Remember: Apply offsets only at the aggregation level allowed by the supplied margin rule.
Hint Common mistake: Netting positions of separate beneficial owners merely because one intermediary handles them.
XVI-134Practice bank se · 16
A trader suffers a valid loss from a fall in a futures price. No intermediary default or settlement failure has occurred. Which statement about the clearing corporation’s settlement guarantee fund is appropriate?
Settlement protection concerns performance of obligations, not protection against the economic result of a valid market position. The loss arises from an adverse price move, not a failure to perform settlement. SEBI’s description links the settlement guarantee fund to default resources. It does not turn every cleared trade into a risk-free investment. Remember: Guaranteed settlement does not mean guaranteed profit.
Hint Common mistake: Confusing protection of the settlement process with insurance of the investor’s price risk.
XVI-135Practice bank se · 17
A short position is subject to compulsory delivery. A seller says it can simply choose to pay a delivery-default penalty instead of arranging the required goods, even though no such alternative is granted in the contract. Which statement is correct?
A consequence of breach is different from an agreed alternative method of performance. The contract specifies compulsory delivery and the facts grant no cash-settlement election. The existence of a penalty for failing to perform does not itself add such an election. Applicable default procedures and consequences must be followed if a breach occurs. Remember: Read default provisions as consequences, not as an automatic menu of settlement options.
Hint Common mistake: Treating a prescribed penalty as the purchase price of permission to ignore a delivery obligation.
XVI-136Practice bank se · 18
In a hypothetical bilateral commodity transaction outside any protected delivery-versus-payment arrangement, a seller transfers title to all goods but the buyer then fails to pay. Which exposure is illustrated most directly?
Settlement principal risk concerns having performed one side of an exchange without receiving the other side’s full value. The seller has already transferred the goods and is waiting for the counter-payment. Failure of that payment threatens the delivered principal value. The scenario is not merely a change in the replacement price while both sides remain unperformed. Remember: Ask whether the exposure is a price change, a replacement cost or value already delivered without payment.
Hint Common mistake: Calling every financial loss market risk even when it arises from settlement non-performance.
XVI-137Practice bank se · 19
For this question, a client’s overall long-position cap is 600 contracts and its near-month cap is 150. It already has 570 long contracts overall, including 110 in the near month. With no offsetting positions, what is the largest additional near-month purchase allowed by both caps?
A proposed position must satisfy every applicable limit, not just the cap that appears closest to the contract’s expiry. Overall headroom = 600 − 570 = 30 contracts. Near-month headroom = 150 − 110 = 40 contracts. A new near-month long increases both measures, so the permitted increment is the smaller headroom: 30 contracts. Remember: Apply all limits to the post-trade position, using the most restrictive remaining capacity.
Hint Common mistake: Checking each cap in isolation and selecting the larger headroom.
XVI-138Practice bank se · 20
A commodity trading platform wants to reduce unauthorised login risk when a user’s password is stolen. Which control most directly addresses that specific risk?
Authentication controls are part of operational and cyber risk management, distinct from market-position limits. A stolen password defeats a password-only login. A separately controlled second factor adds another authentication requirement. It is not a complete defence against every attack, but it directly addresses the stated single-credential failure more appropriately than changing trading limits or exposing the password. Remember: Match a cyber control to the failure it is meant to prevent, and do not mistake one control for complete cyber resilience.
Hint Common mistake: Treating a financial exposure limit as a substitute for access security.
XVI-139Margin is the money a participant must keep in place to carry a leveraged position.
Aage padhoExpiry day is the last day on which a derivative contract can be traded.
Aage padhoLot size is the number of units of the underlying that one derivatives contract stands for.
Aage padho