Secondary Market Transactions
10 questions. Each answer is explained.
Question 1 of 10Practice · Series II-A — Registrars to an Issue and Share Transfer Agents - Corporate
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Learn these topics
More units in NISM Series II-A
- Introduction to Securities10
- Characteristics of Equity Shares10
- Characteristics of Debt Securities10
- Characteristics of Other Securities10
- Basics of Mutual Funds10
- SEBI – Role and Regulations10
- Public Offer of Securities10
- Modes of allotment of shares other than Public Offers10
- Processes related to Public Offering of Shares10
- Roles and Responsibilities in a Public Issue10
- Depository Services10
- Processes Related to Depositories10
- Investor Interface with the R&T Agent10
- Client Servicing10
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 50% · 50 of 100 marks |
| Negative marking | None · a wrong answer costs nothing beyond the mark |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | 5 of 100 marks (5%) |
Source: March 2025 Annexure I, Unit 14: Secondary Market Transactions
NISM Series II-A Registrars to an Issue and Share Transfer Agents - Corporate
Exam rules read on NISM's site on 31 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 31 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 10 questions on Secondary Market Transactions, with answers
Q1What is the central function of the secondary securities market?
Option A. Guaranteeing redemption of every ordinary share
Why it is wrong: Ordinary shares do not gain a guaranteed redemption promise through secondary trading.
Option B. Enabling investors to trade securities already issued — Correct answer
Option C. Approving every company’s loan application
Why it is wrong: Approving company loans is not the market’s central function.
Option D. Creating every company’s initial share capital
Why it is wrong: Initial issuance belongs to the primary market rather than the secondary market.
Answer: B. The secondary market enables investors to trade already issued securities, which can provide an exit route and market price discovery. Remember: The secondary market trades existing securities rather than necessarily creating new capital.
Hint, shown before you answer in practice mode: The securities exist before the transaction between the investors. Common mistake: Assuming every exchange trade raises fresh money for the issuer.
II-A-131easyconceptual
Q2What does listing a security on a recognised stock exchange principally enable?
Option A. Automatic repayment of the security’s purchase price to holders
Why it is wrong: Listing does not promise repayment of the investor’s purchase price.
Option B. Trading through that exchange subject to its applicable framework — Correct answer
Option C. An exchange guarantee of the issuer’s future business success
Why it is wrong: The exchange does not guarantee business success by listing a security.
Option D. Exemption from every continuing disclosure obligation of the issuer
Why it is wrong: Listed status generally brings continuing obligations rather than eliminating them.
Answer: B. Listing principally enables the security to trade on the exchange under its applicable trading and compliance framework. Remember: Listing gives market access together with obligations, not a return guarantee.
Hint, shown before you answer in practice mode: Listing concerns admission to a trading and compliance framework. Common mistake: Treating listing as insurance against issuer failure.
II-A-132easyconceptual
Q3Which named SEBI framework deals with continuing listing obligations and disclosures by listed entities?
Option A. Listing Obligations and Disclosure Requirements Regulations — Correct answer
Option B. Prohibition of Insider Trading Regulations
Why it is wrong: Insider-trading rules address a different regulatory focus, although listed entities must also consider them.
Option C. Registrars to an Issue and Share Transfer Agents Regulations
Why it is wrong: RTA regulations primarily govern registrars and share transfer agents.
Option D. Credit Rating Agencies Regulations
Why it is wrong: Credit Rating Agencies Regulations primarily govern rating agencies.
Answer: A. The Listing Obligations and Disclosure Requirements Regulations address continuing obligations and disclosures of listed entities. Remember: Different SEBI frameworks address different participants and obligations.
Hint, shown before you answer in practice mode: Distinguish issuer disclosure duties from rules focused on particular misconduct or intermediaries. Common mistake: Using the name of an intermediary regulation for listed-issuer disclosure duties.
II-A-133easyconceptual
Q4An investor enters a buy limit order at ₹200. The lowest available sell offer is ₹202. What happens while those prices remain unchanged?
Option A. The exchange must reduce the seller’s price to ₹200
Why it is wrong: The exchange does not force the seller to change its offer price.
Option B. The order must execute at ₹202 regardless of its limit
Why it is wrong: Executing at ₹202 would exceed the stated buy limit.
Option C. The broker must buy at any price and absorb the difference
Why it is wrong: A broker is not required to absorb a price difference to force execution.
Option D. The buy order remains unexecuted at that offer — Correct answer
Answer: D. The buy order remains unexecuted against the ₹202 offer because that price is above the investor’s ₹200 limit. Remember: A limit order controls an acceptable price but does not guarantee execution.
Hint, shown before you answer in practice mode: A buy limit specifies the maximum acceptable purchase price. Common mistake: Assuming entry of a limit order guarantees an immediate trade.
II-A-134mediumapplication
Q5How does trade settlement differ from the matching or execution of a securities order?
Option A. Settlement is only publication of the opening market quote
Why it is wrong: Publishing a quote does not complete delivery obligations.
Option B. Settlement automatically creates a new security class
Why it is wrong: Settlement of existing securities does not automatically create a new security class.
Option C. Settlement is only the investor choosing a desired price
Why it is wrong: Choosing a desired price is order preparation rather than settlement.
Option D. Settlement completes the required securities and funds delivery — Correct answer
Answer: D. Settlement completes the required transfer of securities and funds, whereas execution establishes the trade on matched terms. Remember: An executed trade can still have delivery obligations to be completed.
Hint, shown before you answer in practice mode: Agreement on a trade and completion of its delivery obligations are different stages. Common mistake: Treating order execution as proof that securities and cash have already been delivered.
II-A-135mediumconceptual
Q6An investor buys 100 shares at ₹320. The example contract adds ₹40 brokerage and ₹60 other charges. What is the total purchase outflow?
Option A. ₹32,000
Why it is wrong: ₹32,000 leaves out all stated charges.
Option B. ₹31,900
Why it is wrong: ₹31,900 subtracts purchase charges instead of adding them.
Option C. ₹32,100 — Correct answer
Option D. ₹32,060
Why it is wrong: ₹32,060 includes other charges but omits brokerage.
Answer: C. The total purchase outflow is ₹32,100. Share value = 100 × ₹320 = ₹32,000. Add ₹40 + ₹60 = ₹100 to get ₹32,100. Remember: Purchase outflow includes the share consideration and stated transaction costs.
Hint, shown before you answer in practice mode: Charges paid on a purchase increase the cash required. Common mistake: Using gross traded value as the full amount paid.
II-A-136mediumnumerical
Q7An investor finds a securities debit that does not match any authorised instruction. What is the most appropriate immediate response?
Option A. Delete the statement entry from the personal spreadsheet and forget it
Why it is wrong: Editing a personal spreadsheet does not correct the underlying securities record.
Option B. Report and investigate it through the relevant participant and complaint channels — Correct answer
Option C. Wait until the security price recovers before reporting the debit anywhere
Why it is wrong: A price recovery would not establish whether the debit was authorised.
Option D. Approve an unrelated transfer to offset the missing quantity in the account
Why it is wrong: An unrelated transfer would not resolve the disputed instruction.
Answer: B. The investor should report and investigate the debit through the relevant participant and complaint channels so the transaction and authority can be checked. Remember: Unrecognised securities movements should be investigated rather than hidden or ignored.
Hint, shown before you answer in practice mode: An unexplained debit is a control issue, not simply an investment-performance issue. Common mistake: Waiting for a market-price change to resolve a possible account-security problem.
II-A-137mediumapplication
Q8The best displayed buy price is ₹210 and the best displayed sell price is ₹212. What is the quoted bid-ask spread?
Option A. ₹422
Why it is wrong: ₹422 adds the two prices rather than finding their difference.
Option B. ₹2 — Correct answer
Option C. ₹211
Why it is wrong: ₹211 is the midpoint of the two quotes.
Option D. ₹4
Why it is wrong: ₹4 doubles the actual quoted gap.
Answer: B. The quoted bid-ask spread is ₹2. Calculation: ₹212 best sell price − ₹210 best buy price = ₹2. Remember: The bid-ask spread measures the gap between the best opposing prices.
Hint, shown before you answer in practice mode: The spread is the gap between the two opposing quotes. Common mistake: Confusing the spread with the average of the buy and sell quotes.
II-A-138mediumnumerical
Q9A buy order fills 200 shares at ₹101 and 300 at ₹103. Excluding charges, what is the average purchase price per share?
Option A. ₹103.00
Why it is wrong: ₹103.00 uses only the final fill price and ignores the first fill.
Option B. ₹102.00
Why it is wrong: ₹102.00 gives the two prices equal weights even though quantities differ.
Option C. ₹101.80
Why it is wrong: ₹101.80 reverses the quantities assigned to the two prices.
Option D. ₹102.20 — Correct answer
Answer: D. The average price is ₹102.20. Total cost = 200 × ₹101 + 300 × ₹103 = ₹51,100. Total shares = 500. Average = ₹51,100 ÷ 500 = ₹102.20. Remember: Average execution price is weighted by the quantity filled at each price.
Hint, shown before you answer in practice mode: The fill with more shares carries greater weight in the average. Common mistake: Taking a simple average when fill quantities differ.
II-A-139hardnumerical
Q10An investor buys 100 shares at ₹250 with ₹100 purchase costs. Later, 60 sell at ₹270 with ₹40 sale costs. Allocate purchase costs proportionately. What is realised profit?
Option A. ₹1,160
Why it is wrong: ₹1,160 subtracts sale costs but ignores allocated purchase costs.
Option B. ₹1,060
Why it is wrong: ₹1,060 charges all ₹100 purchase costs against only the 60 shares sold.
Option C. ₹1,100 — Correct answer
Option D. ₹1,200
Why it is wrong: ₹1,200 ignores both allocated purchase costs and sale costs.
Answer: C. Realised profit is ₹1,100. Price gain = 60 × (₹270 − ₹250) = ₹1,200. Allocated purchase costs = ₹100 × 60 ÷ 100 = ₹60. Net realised profit = ₹1,200 − ₹60 − ₹40 = ₹1,100. Remember: Realised profit should match the sold quantity with its relevant costs.
Hint, shown before you answer in practice mode: Match the sold shares with their share of purchase cost and then subtract the selling cost. Common mistake: Charging all acquisition costs to a partial sale or ignoring acquisition costs entirely.
II-A-140hardnumerical
Secondary Market Transactions: common questions
How many practice questions are there on Secondary Market Transactions?
10 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 15 practice topics for NISM Series II-A, which has 150 questions in total.
Are these real NISM Series II-A questions on Secondary Market Transactions?
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.
How much of the NISM Series II-A exam is Secondary Market Transactions?
NISM's published syllabus outline gives it 5 of the paper's 100 marks, or 5% of the exam. It is quoted from the outline, not estimated. The published unit it comes from: March 2025 Annexure I, Unit 14: Secondary Market Transactions
Does negative marking apply to NISM Series II-A?
No. NISM applies no negative marking to Series II-A. A wrong answer costs nothing beyond the mark you did not earn, so a blank is never better than an attempt. 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.
Client Servicing
10 questions on Client Servicing. Its quiz opens on that unit.
Open Client ServicingPaper Trading Try it on the practice trading desk