Clearing, Settlement and Risk Management in Exchange Traded Currency Derivatives
18 questions. Each answer is explained.
Question 1 of 10Practice · Series I — Currency Derivatives
0 right · 0 wrong · 10 to go
A–D or 1–4 to answer · Enter or → for the next question · ← to go back
Learn these topics
More units in NISM Series I
- Introduction to Currency Markets16
- Foreign Exchange Derivatives13
- Exchange Traded Currency Futures15
- Exchange Traded Currency Options20
- Strategies Using Exchange Traded Currency Derivatives19
- Trading Mechanism in Exchange Traded Currency Derivatives13
- Regulatory Framework for Exchange Traded Currency Derivatives12
- Accounting and Taxation11
- Codes of Conduct and Investor Protection Measures13
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | 25% · 0.25 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series I Currency Derivatives
Exam rules read on NISM's site on 3 October 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 3 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 18 questions on Clearing, Settlement and Risk Management in Exchange Traded Currency Derivatives, with answers
Q1At the clearing-member level, which entity becomes buyer to the seller and seller to the buyer when an exchange-traded currency futures trade is novated?
Option A. The original client who took the opposite side of the trade
Why it is wrong: This describes the original matched counterparty rather than the post-novation clearing relationship.
Option B. The clearing bank that transfers the settlement funds
Why it is wrong: A clearing bank provides the payment channel. That role is not the central counterparty role.
Option C. The exchange’s order-matching system that paired the orders
Why it is wrong: The matching system brings orders together. Novation and the clearing guarantee belong to the clearing corporation.
Option D. The clearing corporation acting as central counterparty — Correct answer
Answer: D. The clearing corporation interposes itself as central counterparty at the clearing-member level. The original matched trade is replaced at the clearing level by obligations involving the central counterparty. The clearing corporation therefore faces each clearing side. The clearing bank moves money but does not become the futures counterparty merely by providing payment services. Remember: Keep trade matching, central-counterparty clearing and banking functions separate.
Hint, shown before you answer in practice mode: Common mistake: Assuming that the exchange’s trading platform and the clearing corporation perform the same legal role.
I-028easyconceptual
Q2An outright USD-INR futures position has a mark-to-market gross value of ₹2,20,00,000. Using NSE Clearing’s 0.50% Extreme Loss Margin rate for these futures, what is the ELM alone? Assume no spread benefit or additional margin.
Option A. ₹11,000
Why it is wrong: ₹11,000 uses 0.05%, a decimal-place error that understates the stated rate by a factor of ten.
Option B. ₹1,10,000 — Correct answer
Option C. ₹1,65,000
Why it is wrong: ₹1,65,000 applies 0.75%, the listed USD-INR short-options ELM rate, rather than the futures rate.
Option D. ₹2,20,000
Why it is wrong: ₹2,20,000 uses 1%. That is not the USD-INR futures rate in the inspected clearing margin table.
Answer: B. Applying 0.50% to ₹2,20,00,000 gives ₹1,10,000. For this USD-INR futures position, ELM = gross mark-to-market value × ELM rate. Convert 0.50% to 0.005. Calculate ₹2,20,00,000 × 0.005 = ₹1,10,000. This is ELM only. Initial margin, daily losses or other applicable amounts are not included in the requested result. Remember: Match the margin rate to futures or short options before multiplying the correct notional base.
Hint, shown before you answer in practice mode: Common mistake: Using an outdated exchange overview or a short-options rate for a futures position.
I-029easynumerical
Q3Assume total USD-INR open interest on NSE is USD 500 million. What ordinary client-level USD-INR position limit follows from the published exchange rule? Consider this limit alone, not the separate underlying-exposure requirements.
Option A. USD 20 million
Why it is wrong: USD 20 million is the fixed limb, but the percentage limb is higher in this example.
Option B. USD 10 million
Why it is wrong: This uses the older USD 10 million figure rather than the inspected client-limit rule.
Option C. USD 30 million — Correct answer
Option D. USD 75 million
Why it is wrong: USD 75 million is 15% of the assumed open interest. That is not the ordinary client percentage.
Answer: C. Six percent gives USD 30 million, which exceeds the fixed USD 20 million limb. Calculate the percentage limb: 6% × USD 500 million = USD 30 million. Compare USD 30 million with USD 20 million. The higher amount is USD 30 million. Meeting this position ceiling does not by itself establish compliance with RBI’s hedging and underlying-exposure requirements. Remember: Calculate both limbs of a higher-of limit and apply the correct participant category.
Hint, shown before you answer in practice mode: Common mistake: Using the fixed amount without comparison or mixing up client and trading-member limits.
I-030mediumregulatory
Q4Under NSE’s standard specification, when does trading end in a monthly USD-INR futures contract? Ignore any separately notified holiday or special-session adjustment.
Option A. At 12:30 p.m. IST, two working days before the last business day of the expiry month — Correct answer
Option B. At 5:00 p.m. IST on the last business day of the expiry month
Why it is wrong: This uses the last business day and the normal session closing time instead of the expiry trading rule.
Option C. At 12:30 p.m. IST, one working day before the last business day of the expiry month
Why it is wrong: This counts back only one working day rather than two.
Option D. At 5:00 p.m. IST, two working days before the last business day of the expiry month
Why it is wrong: The date rule is right, but 5:00 p.m. is not the specified last trading time for the expiring monthly contract.
Answer: A. This combines the specified two-working-day rule with the 12:30 p.m. trading cutoff. Start from the last business day of the expiry month and count back two working days. The standard last trading time on that date is 12:30 p.m. IST. Normal session hours do not extend an expiring contract beyond this cutoff. Remember: Identify both the expiry date rule and its contract-specific trading cutoff.
Hint, shown before you answer in practice mode: Common mistake: Treating a normal trading-day close as the expiry cutoff, or counting calendar days instead of working days.
I-031easyregulatory
Q5Which benchmark is prescribed for the final settlement price of an exchange-traded USD-INR futures contract when the corresponding FBIL reference rate is available?
Option A. The contract’s last traded futures price
Why it is wrong: The last traded futures price is a market transaction price, not the prescribed final-settlement benchmark.
Option B. The corresponding FBIL reference rate on the funds payout day
Why it is wrong: It identifies FBIL but uses the wrong day. The rule refers to the last trading day, not the funds payout day.
Option C. The broker’s USD-INR closing quotation
Why it is wrong: A broker’s quotation does not determine the clearing benchmark.
Option D. The corresponding FBIL reference rate on the last trading day — Correct answer
Answer: D. Both the benchmark administrator and the observation day match the prescribed rule. RBI’s exchange-traded foreign exchange directions specify the corresponding FBIL reference rate on the contract’s last trading day for INR pairs. Use that rate for the settlement benchmark. Do not replace its observation date with the later date when settlement money is paid. Remember: For the specified INR-pair final settlement, identify FBIL and the last trading day together.
Hint, shown before you answer in practice mode: Common mistake: Carrying forward an older RBI-labelled website row or using the funds payout date for the reference rate.
I-032easyregulatory
Q6A trader buys 30 USD-INR futures contracts at 88.2000. The same day’s settlement price is 88.0500. Each contract represents USD 1,000. What is the day’s mark-to-market result? Ignore charges.
Option A. ₹4,500 gain
Why it is wrong: This has the right magnitude but reverses the sign for a long position when the price falls.
Option B. ₹4,500 loss — Correct answer
Option C. ₹150 loss
Why it is wrong: ₹150 is the loss on one contract. The position contains 30 contracts.
Option D. ₹45,000 loss
Why it is wrong: This is ten times the correct loss. It would require a price change of ₹1.50 per USD.
Answer: B. The fall of ₹0.15 per USD on USD 30,000 gives a ₹4,500 loss. For a first-day long position, MTM = (settlement price − entry price) × contract size × number of contracts. The change is 88.0500 − 88.2000 = −₹0.1500 per USD. MTM = −0.1500 × 1,000 × 30 = −₹4,500. The negative sign denotes a loss and a settlement obligation. Remember: Apply the signed rate change to the full foreign-currency quantity, not just to the number of contracts.
Hint, shown before you answer in practice mode: Common mistake: Dropping the contract multiplier or treating a fall as a gain for a long position.
I-033easynumerical
Q7In one currency-futures contract, Client P buys 10 lots and sells 4 lots. Client Q sells 6 lots. There are no other positions. Apply NSE Clearing’s client-netting basis and assume initial margin is ₹1,800 per net open lot. What is the combined client initial margin?
Option A. ₹21,600 — Correct answer
Option B. ₹0
Why it is wrong: This improperly offsets P’s long position against Q’s short position.
Option C. ₹10,800
Why it is wrong: This includes only one client’s 6 lots and ignores the other client’s exposure.
Option D. ₹36,000
Why it is wrong: This charges all 20 bought or sold lots without netting P’s opposing trades in the same contract.
Answer: A. Each client contributes 6 open lots to the gross client-level requirement, giving 12 × ₹1,800. Client P’s net position is 10 − 4 = 6 lots long. Client Q has 6 lots short. Add the absolute client-level net positions: |6| + |−6| = 12 marginable lots. Combined initial margin under the assumed per-lot rule = 12 × ₹1,800 = ₹21,600. This simplified rate is hypothetical, not an actual SPAN requirement. Remember: Net within each client first, then aggregate the client requirements without cross-client offsets.
Hint, shown before you answer in practice mode: Common mistake: Using the member’s net directional exposure as if it were the total marginable client exposure.
I-047hardnumerical
Q8A currency-futures position is closed with a verified cumulative trading loss of ₹6,000. The client had posted ₹4,000 as initial margin. There is no broker error and costs are ignored. Which amount is the client’s trading loss?
Option A. ₹6,000 — Correct answer
Option B. ₹4,000
Why it is wrong: This assumes the loss is limited to posted margin, as if the margin were a purchased option premium.
Option C. ₹2,000
Why it is wrong: This is only the excess over the initial margin. It is not the complete trading loss.
Option D. ₹10,000
Why it is wrong: This adds the ₹4,000 collateral to the ₹6,000 loss and double-counts money used to support settlement.
Answer: A. The trading loss remains the verified ₹6,000, even though it exceeds the initial margin. The problem states the full cumulative price-based loss as ₹6,000. Posting ₹4,000 collateral does not change that result. The loss exceeds the initial margin by ₹2,000. That excess is not the total loss, and the initial margin should not be added again as an extra expense. Actual cash still payable would depend on prior MTM payments, which the question does not give. Remember: Distinguish a futures P&L amount from collateral and from any remaining cash-settlement balance.
Hint, shown before you answer in practice mode: Common mistake: Treating margin as a maximum loss or adding it to P&L as a separate trading cost.
I-067mediumapplication
Q9For daily settlement of currency-futures MTM, what is the role of a clearing member’s account with a clearing bank?
Option A. It recalculates all clients’ open futures positions.
Why it is wrong: Position and obligation calculations occur in the clearing process. The bank account is used for the resulting funds movement.
Option B. It becomes the central counterparty to each trade.
Why it is wrong: The clearing corporation’s counterparty role is different from maintaining an account for settlement payments.
Option C. It sets the daily settlement price for the contract.
Why it is wrong: A settlement account does not determine the contract’s settlement price.
Option D. It receives the settlement debit or credit. — Correct answer
Answer: D. The account receives the funds debit or credit arising from MTM settlement. NSE Clearing’s daily MTM description states that losses and profits are debited or credited to the clearing member’s clearing-bank account. That banking role is distinct from calculating open positions, acting as the central counterparty or setting a settlement price. Remember: Separate the calculation of settlement obligations from the bank-account movement that pays or receives them.
Hint, shown before you answer in practice mode: Common mistake: Confusing the exchange, clearing corporation and clearing bank because all participate in the trade lifecycle.
I-068easyconceptual
Q10Which event is the Core Settlement Guarantee Fund designed to address within the applicable default waterfall?
Option A. A hedger receives less than an unhedged competitor.
Why it is wrong: Relative performance of hedged and unhedged businesses is not a clearing-member settlement default.
Option B. A clearing member fails to honour settlement commitments. — Correct answer
Option C. A correctly executed client trade loses money.
Why it is wrong: A normal market loss is a trading outcome, not by itself a failure in the clearing settlement process.
Option D. A member wishes to finance routine initial margin.
Why it is wrong: The fund is not a standing loan facility that members may use instead of posting required margin.
Answer: B. Failure to meet settlement commitments is the fund’s stated default-management purpose. The official policy identifies a clearing member’s failure to meet settlement commitments as the event for using the Core SGF to help complete settlement. Use is governed by the applicable default framework and resource sequence. The question does not imply that the fund is the first resource used or that it guarantees every investor’s economic return. Remember: Associate Core SGF with settlement completion after member default, not with protecting trading profits.
Hint, shown before you answer in practice mode: Common mistake: Confusing settlement protection with compensation for ordinary market losses or with free margin funding.
I-069easyconceptual
Q11A clearing member uses an interoperability arrangement for eligible currency-derivative trades executed on two recognised exchanges. Which statement describes the arrangement correctly?
Option A. Trades on both exchanges must first be matched in one combined exchange order book
Why it is wrong: The clearing link does not itself merge the exchanges’ order books.
Option B. Trades on separate exchanges may clear and settle through the selected clearing corporation — Correct answer
Option C. Each exchange’s trades must remain exclusively with its own original clearing corporation
Why it is wrong: That restriction is inconsistent with the clearing choice supplied by interoperability.
Option D. Selecting a clearing corporation automatically provides trading membership on both exchanges
Why it is wrong: Clearing selection does not by itself confer trading rights on every execution venue.
Answer: B. Interoperability provides a clearing choice for eligible trades across exchanges. Trading venue and clearing provider need not be the same choice. The member executes trades through the applicable exchange arrangements. The interoperability framework lets eligible trades from multiple exchanges be cleared and settled through the selected clearing corporation. This does not merge order matching or replace exchange-specific trading admission. Applicable membership, product and risk requirements continue to matter. Remember: Trading venue choice and clearing corporation choice are different decisions.
Hint, shown before you answer in practice mode: Common mistake: Interpreting a common clearing arrangement as a common order book or an automatic grant of trading rights.
I-091mediumapplication
Q12For this calculation, accepted securities worth ₹1,00,000 receive a 15% haircut, while ₹40,000 cash receives none. Required margin is ₹1,30,000. Ignore composition limits and all other adjustments. What is the collateral surplus or shortfall?
Option A. A surplus of ₹10,000
Why it is wrong: This compares the unadjusted ₹1,40,000 with the margin requirement and ignores the securities haircut.
Option B. A shortfall of ₹11,000
Why it is wrong: This also applies the 15% haircut to the cash, contrary to the stated assumption.
Option C. A surplus of ₹5,000
Why it is wrong: This reverses the sign. Recognised collateral is lower than the margin requirement.
Option D. A shortfall of ₹5,000 — Correct answer
Answer: D. Recognised collateral is 1,00,000 × 0.85 + 40,000 = ₹1,25,000, which is ₹5,000 below the requirement. Recognised securities value = 1,00,000 × (1 − 0.15) = ₹85,000. Add the full ₹40,000 cash to obtain recognised collateral of ₹1,25,000. Surplus or shortfall = recognised collateral − required margin = 1,25,000 − 1,30,000 = −₹5,000, a shortfall. The example deliberately isolates haircut arithmetic. Actual eligibility, composition limits and additional risk controls must be assessed separately. Remember: Apply each haircut to the relevant collateral component before comparing with the requirement.
Hint, shown before you answer in practice mode: Common mistake: Using market value without a haircut or applying the securities haircut to cash as well.
I-092mediumnumerical
Q13A simplified scanning-risk exercise uses only four portfolio profit/loss scenarios: −₹18,000, −₹12,500, +₹9,000 and +₹6,000. Negative values mean losses. What is the scanning-risk charge before any other margin components?
Option A. ₹30,500
Why it is wrong: This adds the two loss scenarios as though both occurred together. They are alternative outcomes.
Option B. ₹15,500
Why it is wrong: This nets the profits and losses across all scenarios. Scanning risk does not treat mutually exclusive scenarios as simultaneous cash flows.
Option C. ₹18,000 — Correct answer
Option D. ₹3,875
Why it is wrong: This averages the net loss across the four scenarios instead of selecting the worst loss.
Answer: C. The largest loss among the four alternative scenarios is ₹18,000. The two loss scenarios are ₹18,000 and ₹12,500. The other two scenarios are gains. The worst of these outcomes is a loss of ₹18,000, so the illustrative scanning-risk charge is ₹18,000. This is only the scanning component. Other margin components, if applicable, are not determined by these four figures. The question supplies ordinary profit/loss signs. An actual SPAN risk array may use the opposite sign convention, so read the data definition before calculating. Remember: Choose the worst scenario loss, then distinguish that component from total margin.
Hint, shown before you answer in practice mode: Common mistake: Adding losses from mutually exclusive scenarios or confusing risk-array signs with ordinary profit/loss signs.
I-093easynumerical
Q14For this question only, a valid same-currency futures calendar spread requires ₹400 per matched near/far pair, and each unmatched contract requires ₹2,100. A client is long 70 near-month contracts and short 45 far-month contracts of equal size. With no other margins or positions, what is the total requirement?
Option A. ₹70,500 — Correct answer
Option B. ₹2,41,500
Why it is wrong: It charges all 115 contracts at ₹2,100 and ignores the expressly supplied spread treatment.
Option C. ₹18,000
Why it is wrong: It accounts for the 45 pairs but ignores the 25 residual near-month contracts.
Option D. ₹52,500
Why it is wrong: It accounts for the residual contracts but incorrectly treats the spread pairs as requiring zero margin.
Answer: A. This answer applies the assumed pair rate to 45 matched pairs and the outright rate only to the 25 residual contracts. Matched pairs = min(70, 45) = 45. Those pairs use 45 of the 70 near-month longs and all 45 far-month shorts. Unmatched quantity = 70 − 45 = 25 near-month long contracts. Pair margin = 45 × ₹400 = ₹18,000. Outright margin = 25 × ₹2,100 = ₹52,500. Total requirement = ₹18,000 + ₹52,500 = ₹70,500. The 45 pairs contain 90 contracts, not 45 contracts in total. Remember: Match the smaller opposing quantity first and then calculate margin on the unpaired remainder.
Hint, shown before you answer in practice mode: Common mistake: Counting a pair as one original contract or assuming every contract qualifies for spread treatment.
I-116hardnumerical
Q15At an intraday checkpoint, one client has ₹8,000 crystallized futures profit, ₹12,000 option premium payable and ₹1,500 option premium receivable. None has settled and there are no other items. Under NSE Clearing’s net-payable approach, what is this client’s consolidated crystallized obligation margin alone?
Option A. ₹12,000
Why it is wrong: It ignores both the futures profit and premium receivable.
Option B. ₹10,500
Why it is wrong: It nets the premium receivable but fails to include the ₹8,000 crystallized futures profit.
Option C. ₹2,500 — Correct answer
Option D. ₹21,500
Why it is wrong: It adds all three amounts as liabilities, reversing the sign of both credits.
Answer: C. This answer nets both stated credits against the premium payable at the same client level. Premium payable contributes ₹12,000 to the obligation. The ₹8,000 futures profit and ₹1,500 premium receivable are credits. Net payable = ₹12,000 − ₹8,000 − ₹1,500 = ₹2,500. Because the result is payable, the component requested is ₹2,500. This calculation does not say that the client’s total initial, extreme-loss or other margins equal ₹2,500. Remember: For this component, identify the client’s payable and receivable signs before calculating the net payable.
Hint, shown before you answer in practice mode: Common mistake: Treating a receivable as a liability or calling one component the client’s entire margin.
I-117mediumnumerical
Q16In an illustrative 99% one-day VaR model, the chance of a loss above ₹50,000 is 1% on each day. If this probability remains valid over 250 trading days, which statement about breaches is correct?
Option A. At most two breaches can occur because the count must be an integer.
Why it is wrong: The integer nature of an actual count does not impose a ceiling of two.
Option B. Exactly three breaches must occur after rounding 2.5 upwards.
Why it is wrong: Rounding an expectation cannot determine the outcome of the 250 days.
Option C. No breach can occur because ₹50,000 is the maximum possible loss.
Why it is wrong: A 1% chance of crossing the threshold expressly allows larger losses. The threshold is not a maximum-loss guarantee.
Option D. The expected number is 2.5, but the actual count can differ. — Correct answer
Answer: D. This answer distinguishes the model’s average count from the actual random count. The expected number of breaches is the sum of the daily breach probabilities: 250 × 0.01 = 2.5. A realised count must be a whole number, but an expectation need not be. Rounding the expectation does not turn it into a promised count. Losses may exceed the stated threshold. This calculation says nothing about how large those tail losses could be. Independence is not needed merely to add the expected daily indicator values. Remember: VaR describes a percentile under assumptions, not the worst loss or an exact schedule of exceptions.
Hint, shown before you answer in practice mode: Common mistake: Treating 99% confidence as 100% protection against losses beyond the threshold.
I-118mediumapplication
Q17For the same USD-INR contract, a clearing member has a client net long 12 contracts and a proprietary net short 12 contracts. Assume margin is ₹2,000 per net contract in each category, with all other components ignored. Applying NSE Clearing’s client/proprietary separation, what total margin follows?
Option A. ₹0
Why it is wrong: This nets the client long against the member’s proprietary short, contrary to the stated separation.
Option B. ₹24,000
Why it is wrong: This counts only one of the two separately margined categories.
Option C. ₹96,000
Why it is wrong: This doubles the charge again after both client and proprietary categories have already been included.
Option D. ₹48,000 — Correct answer
Answer: D. Each 12-contract category requires ₹24,000 under the hypothetical rate. Client margin = 12 × ₹2,000 = ₹24,000. Proprietary margin is calculated on its own net 12-contract short position, giving another ₹24,000. Total under the supplied simplified rule = 24,000 + 24,000 = ₹48,000. The economic directions are opposite, but the permitted margin aggregation does not offset these categories. Remember: Check who owns each position before applying a netting benefit.
Hint, shown before you answer in practice mode: Common mistake: Netting every opposite position held through one clearing member regardless of client or proprietary ownership.
I-140mediumnumerical
Q18A member must pay ₹25,000 of MTM in cash by a stated deadline. It has ₹15,000 of available cash and ₹40,000 of approved non-cash collateral that cannot be converted or used for this cash payment before the deadline. A ₹12,000 receipt arrives afterward. What additional cash is needed by the deadline?
Option A. ₹0
Why it is wrong: This treats total collateral or a later receipt as if it were spendable cash at the deadline.
Option B. ₹3,000
Why it is wrong: Subtracting ₹12,000 from ₹15,000 does not calculate the shortage and ignores the receipt’s late timing.
Option C. ₹10,000 — Correct answer
Option D. ₹25,000
Why it is wrong: The existing ₹15,000 cash is usable and must be deducted from the ₹25,000 requirement.
Answer: C. The member must bridge the ₹10,000 difference between the cash due and the cash actually available. Only ₹15,000 of the member’s resources is usable cash before the specified deadline. The non-cash collateral may have a separate collateral value, but the question expressly makes it unavailable for this payment. The later receipt also misses the deadline. Additional cash required = ₹25,000 − ₹15,000 = ₹10,000. Remember: Separate collateral adequacy from the timing of usable cash for settlement.
Hint, shown before you answer in practice mode: Common mistake: Counting resources that cannot meet the specific payment obligation before its deadline.
I-141mediumapplication
Clearing, Settlement and Risk Management in Exchange Traded Currency Derivatives: common questions
How many practice questions are there on Clearing, Settlement and Risk Management in Exchange Traded Currency Derivatives?
18 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 10 practice topics for NISM Series I, which has 150 questions in total.
Are these real NISM Series I questions on Clearing, Settlement and Risk Management in Exchange Traded Currency Derivatives?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
Does negative marking apply to NISM Series I?
Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1-mark question that is 0.25 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
Regulatory Framework for Exchange Traded Currency Derivatives
12 questions on Regulatory Framework for Exchange Traded Currency Derivatives. Its quiz opens on that unit.
Open Regulatory Framework for Exchange Traded Currency Derivatives