Clearing Process
17 questions. Each answer is explained.
Question 1 of 10Practice · Series VII — Securities Operations and Risk Management
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More units in NISM Series VII
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 50% · 50 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 VII Securities Operations and Risk Management
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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 17 questions on Clearing Process, with answers
Q1After a centrally cleared trade is novated, which entity stands as the counterparty to the clearing obligations on each side?
Option A. The clearing bank
Why it is wrong: A clearing bank processes money movements without becoming the central counterparty.
Option B. The depository participant
Why it is wrong: A DP provides depository services rather than taking this clearing-counterparty position.
Option C. The securities issuer
Why it is wrong: Issuing the security does not make the company counterparty to each later cleared trade.
Option D. The clearing corporation — Correct answer
Answer: D. The clearing corporation performs the central-counterparty role being tested. Novation places the central counterparty between the original clearing sides. The clearing corporation therefore stands on the opposite side of the relevant obligations. This does not mean that a retail client ceases to have a separate relationship with its broker. Remember: Distinguish the entity assuming the clearing-counterparty role from entities processing assets or money.
Hint, shown before you answer in practice mode: Common mistake: Assuming that the institution moving the funds must also be the trade counterparty.
VII-022easyconceptual
Q2What does a clearing bank do in exchange-trade funds settlement?
Option A. It debits and credits member clearing accounts as instructed — Correct answer
Option B. It decides each security's official daily closing price
Why it is wrong: Determining an official closing price is not this banking function.
Option C. It transfers shares between the demat accounts of buyers and sellers
Why it is wrong: Share movement belongs to the securities leg, not the bank-account leg.
Option D. It matches buy and sell orders placed on the exchange by members
Why it is wrong: Order matching is a trading-system function, not the bank's funds-settlement task.
Answer: A. This identifies the money movements performed through clearing accounts. Funds obligations require money to move through designated clearing accounts. The clearing bank processes those debits and credits under clearing-corporation instructions. Determining obligations and moving securities are separate functions. Remember: Associate the clearing bank with cash movements under settlement instructions.
Hint, shown before you answer in practice mode: Common mistake: Treating every institution with clearing in its name as performing the same job.
VII-023easyconceptual
Q3An eligible trading member executes a trade on NSE under interoperability. Which route applies for risk management, clearing and settlement?
Option A. NSE's associated clearing corporation, regardless of the member's designated arrangement
Why it is wrong: This would disregard the designated clearing arrangement that interoperability permits.
Option B. The designated clearing corporation of the clearing member chosen by the trading member — Correct answer
Option C. A clearing corporation selected by the end client independently of the member's arrangement
Why it is wrong: The inspected route follows the member arrangement, not an independent choice by the end client.
Option D. One clearing corporation for risk management and a different one for settlement
Why it is wrong: The circular routes these functions together to the designated clearing corporation, not to the split arrangement described.
Answer: B. This follows the designation mechanism stated in the official circular. The executing exchange and the designated clearing arrangement are distinct. The inspected NSE circular routes the trade to the designated clearing corporation of the clearing member selected by the trading member. The route covers risk management, clearing and settlement. Remember: Distinguish the execution venue from the member's designated clearing arrangement.
Hint, shown before you answer in practice mode: Common mistake: Assuming that execution on one exchange fixes the clearing corporation regardless of an eligible member's arrangement.
VII-024mediumapplication
Q4In the same normal netted settlement, one client buys 800 shares and sells 500 shares of the same security. Ignoring other trades, what is the client's net securities obligation?
Option A. Deliver 300 shares
Why it is wrong: The quantity is correct but the direction is reversed.
Option B. Receive 800 shares
Why it is wrong: This ignores the delivery obligation from the sale.
Option C. Receive 300 shares — Correct answer
Option D. Receive 1,300 shares
Why it is wrong: This adds gross activity rather than netting opposite directions.
Answer: C. The buy quantity exceeds the sell quantity by 300, producing a net receipt. The purchase creates a claim to receive 800 shares. The sale creates an obligation to deliver 500 shares. Net receipt = 800 − 500 = 300 shares. This is a quantity obligation, not a rupee profit or loss. Remember: For a netted securities position, subtract sells from buys and keep the sign.
Hint, shown before you answer in practice mode: Common mistake: Adding buy and sell quantities or netting across different clients or settlements.
VII-025mediumnumerical
Q5For eligible trades in NSE Clearing’s optional T+0 settlement, by what time are settlement obligations determined on T day?
Option A. 1:30 pm
Why it is wrong: 1:30 pm is the trading close stated for this T+0 process, not the obligation-determination deadline.
Option B. 1:45 pm
Why it is wrong: 1:45 pm relates to the non-custodial early-pay-in process, not determination of obligations.
Option C. 3:30 pm
Why it is wrong: 3:30 pm is a later settlement-stage cut-off, not this determination deadline.
Option D. 2:30 pm — Correct answer
Answer: D. Obligations are determined by 2:30 pm on the trade day. NSE Clearing specifies 2:30 pm on T day for determining optional T+0 obligations. The trade-closing and securities-pay-in stages have different deadlines. A deadline for one stage must not be substituted for another. Remember: Identify the process stage before selecting a time.
Hint, shown before you answer in practice mode: Common mistake: Remembering a T+0 time without remembering what it controls.
VII-026easyregulatory
Q6In a trade-for-trade category settled on a gross basis, one client buys 120 shares at ₹250 and sells 80 shares at ₹255 in the same settlement. Ignoring charges, what are the funds obligations?
Option A. Pay ₹9,600 and receive nil
Why it is wrong: It nets the two trades despite the stated gross-settlement treatment.
Option B. Pay ₹30,000 and receive nil
Why it is wrong: It ignores the sale receivable.
Option C. Pay nil and receive ₹20,400
Why it is wrong: It ignores the purchase payable.
Option D. Pay ₹30,000 and receive ₹20,400 — Correct answer
Answer: D. This answer retains the complete purchase payment and sale receipt. Purchase payable = 120 × ₹250 = ₹30,000. Sale receivable = 80 × ₹255 = ₹20,400. The specified gross-settlement category retains both amounts. The ₹9,600 difference is not a substitute for those gross obligations. Remember: Determine the settlement category before netting opposite trades.
Hint, shown before you answer in practice mode: Common mistake: Applying normal net-settlement arithmetic automatically to trade-for-trade obligations.
VII-064mediumnumerical
Q7In one netted settlement, client R buys 300 shares at ₹400 and sells 100 shares of the same company at ₹410. Ignoring charges, what is R's net funds obligation?
Option A. Pay ₹80,000
Why it is wrong: This values the 200 net shares at ₹400 and loses the ₹10 higher sale price.
Option B. Receive ₹79,000
Why it is wrong: This turns the payment into a receipt.
Option C. Pay ₹79,000 — Correct answer
Option D. Pay ₹1,20,000
Why it is wrong: This ignores the money from the sale.
Answer: C. Net funds use each trade's own price. R pays 300 × ₹400 = ₹1,20,000 and receives 100 × ₹410 = ₹41,000. Net payable = ₹79,000. Remember: Net trade consideration using actual execution prices.
Hint, shown before you answer in practice mode: Common mistake: Using the margin valuation price when calculating settlement cash.
VII-071mediumnumerical
Q8In one netted settlement, a member's trades in share Alpha are: client R buys 300 and sells 100, client S sells 150, and the member's own account buys 50. In share Beta, client S buys 200 and the own account sells 50. What is the member's net securities obligation?
Option A. Receive 250 Alpha shares and no Beta shares
Why it is wrong: This adds the Beta quantity into Alpha.
Option B. Receive 100 Alpha shares and 150 Beta shares — Correct answer
Option C. Receive 100 Alpha shares and 250 Beta shares
Why it is wrong: This adds the Beta sale instead of taking it off.
Option D. Deliver 100 Alpha shares and 150 Beta shares
Why it is wrong: The quantities are right but the direction is reversed.
Answer: B. Net each share separately. Alpha: 200 − 150 + 50 = 100 to receive. Beta: 200 − 50 = 150 to receive. Different shares are never added together. Remember: Net within an ISIN, not across unrelated securities.
Hint, shown before you answer in practice mode: Common mistake: Treating one share of one company as interchangeable with one share of another.
VII-072hardnumerical
Q9A trading member assigns an executed cash-market trade to a custodian. The custodian rejects it under NSE Clearing’s process. Where is the settlement obligation assigned?
Option A. Back to the trading member — Correct answer
Option B. To the custodian despite the rejection
Why it is wrong: This treats rejection as confirmation.
Option C. To the securities issuer
Why it is wrong: The issuer does not take over settlement of this secondary-market trade.
Option D. To neither party because the trade is cancelled
Why it is wrong: The rejection does not by itself annul the executed trade.
Answer: A. Custodial rejection returns the obligation to the trading member rather than cancelling the exchange trade. The trade has already been executed. The question concerns who will settle it. NSE Clearing assigns a rejected custodial trade back to the trading member for settlement obligations. Remember: A rejected custodial assignment does not make the executed trade disappear.
Hint, shown before you answer in practice mode: Common mistake: Confusing a rejected clearing assignment with cancellation of execution.
VII-086mediumapplication
Q10Trading Member A executes an F&O trade for a custodial participant (CP). A clears through CM X, but the CP’s designated clearing member is CM Y. Which entity confirms the CP trade under the specified process?
Option A. CM X, because it clears the executing member
Why it is wrong: This confuses the executing member’s clearing arrangement with the CP’s confirming arrangement.
Option B. Both CM X and CM Y as joint confirming members
Why it is wrong: The process identifies the CP’s clearing member, not a joint confirmation role.
Option C. Trading Member A instead of either clearing member
Why it is wrong: Execution by the trading member does not replace confirmation by the CP’s clearing member.
Option D. CM Y, the CP’s clearing member — Correct answer
Answer: D. The confirming entity is the clearing member of the custodial participant. Identify the clearing member designated for the CP, not merely the one used by the executing trading member. Here that entity is CM Y. NSE Clearing’s CP process assigns confirmation to the clearing member of the CP. Remember: For CP confirmation, follow the CP’s clearing member.
Hint, shown before you answer in practice mode: Common mistake: Automatically choosing the clearing member of the broker that executed the trade.
VII-087mediumapplication
Q11A client buys 2 index call contracts at a premium of ₹140, sells 1 call at ₹60 and sells 1 put at ₹90. Premiums are per index unit and each contract is 40 units. What is the client's net premium obligation?
Option A. Pay ₹11,200
Why it is wrong: This counts only the two calls bought.
Option B. Receive ₹6,000
Why it is wrong: This counts only the two options sold.
Option C. Pay ₹5,200 — Correct answer
Option D. Pay ₹17,200
Why it is wrong: This adds the premium received instead of netting it.
Answer: C. Premium is paid on options bought and received on options sold. Paid: 2 × ₹140 × 40 = ₹11,200. Received: (₹60 + ₹90) × 40 = ₹6,000. Net = ₹5,200 to pay. Remember: Convert per-unit premiums to contract amounts, then net payments against receipts.
Hint, shown before you answer in practice mode: Common mistake: Ignoring the number of bought contracts or treating sale premiums as payments.
VII-096mediumnumerical
Q12A client buys two near-month futures contracts and sells two next-month futures contracts on the same index. Both remain open. How should the position record show them?
Option A. Long two near-month and short two next-month contracts — Correct answer
Option B. No open contracts, because the buys equal the sells
Why it is wrong: It nets trades across different expiries as though they were identical contracts.
Option C. Long four near-month contracts, combining both trades
Why it is wrong: It converts the short position into a long position and assigns the wrong expiry.
Option D. Short four next-month contracts, combining both trades
Why it is wrong: It converts the long position into a short position and assigns the wrong expiry.
Answer: A. This answer preserves the side, quantity and expiry of each open contract. The near-month purchase and next-month sale relate to different contracts. They remain separate open positions. Any possible spread-margin treatment does not turn them into a completed offset in one contract. Remember: Only matching contract identities can be treated as an offsetting close in the position record.
Hint, shown before you answer in practice mode: Common mistake: Equating a calendar spread with having no open position.
VII-112mediumapplication
Q13A client buys 3 index futures contracts and later sells 1 of them to close. Each contract is 25 index units. How many index units does the remaining long position represent?
Option A. 50 units — Correct answer
Option B. 100 units
Why it is wrong: This adds the sell to the buys as if all four were open.
Option C. 75 units
Why it is wrong: This ignores the contract that was sold.
Option D. 25 units
Why it is wrong: This is the contract that was closed, not the one still open.
Answer: A. Two contracts stay open after one is sold. 2 × 25 = 50 units. Remember: Distinguish gross trading activity from net open quantity within the same contract.
Hint, shown before you answer in practice mode: Common mistake: Adding buys and sells when the question asks for the open position.
VII-123mediumnumerical
Q14A client authenticates an eDIS for 100 shares in settlement S1 on date D1. Another 100-share delivery of the same ISIN is due in S2 on a different date. Does the S1 authentication alone authorise S2?
Option A. No. S2 requires its own valid authorisation. — Correct answer
Option B. Yes. The same ISIN makes the authorisation reusable.
Why it is wrong: ISIN identity does not remove the settlement-specific restriction.
Option C. Yes. The equal quantity makes the authorisation reusable.
Why it is wrong: Matching quantity does not carry authorisation across settlements.
Option D. Yes. Once authenticated, it becomes a standing instruction for that security.
Why it is wrong: The authentication described is not a standing instruction.
Answer: A. The second settlement needs a valid authorisation covering it. The second obligation has a different settlement number and date. CDSL’s eDIS description requires authorisation for each single settlement number and date. Matching the security and quantity does not convert the earlier eDIS into a standing permission. The question concerns reuse of S1 authentication. It does not exclude other valid instruction mechanisms that may separately authorise S2. Remember: Check settlement identity as well as security and quantity in an eDIS instruction.
Hint, shown before you answer in practice mode: Common mistake: Reusing a prior settlement’s authentication because the next delivery looks similar.
VII-137mediumapplication
Q15A client wants to confirm that purchased shares were actually credited to the demat account. Which record most directly establishes that credit?
Option A. The order acknowledgement received when the buy order was placed
Why it is wrong: An acknowledged order may not yet have executed or settled.
Option B. The bank statement showing the payment made for these shares
Why it is wrong: A money debit does not record a securities credit.
Option C. The contract note confirming the purchase and its price
Why it is wrong: A contract note confirms trading but does not itself record the depository credit.
Option D. The depository transaction statement showing the ISIN credit — Correct answer
Answer: D. This answer directly records the credit into the relevant demat account. The fact to establish is whether the demat account received the securities. The depository transaction statement records the account credit. The security identifier, quantity and account must match the expected receipt. An order acknowledgement, payment or executed-trade confirmation does not by itself prove that this later credit was posted. Remember: Verify securities receipt in the depository record, not only in trading or banking records.
Hint, shown before you answer in practice mode: Common mistake: Treating evidence of payment as proof of securities delivery.
VII-138easyapplication
Q16In one netted settlement of one share, client A buys 800 and sells 200, B buys 100 and sells 500, C buys 100 and sells 350, and D buys 200 and sells 50. How many shares must be delivered to the clearing corporation for the clients' net sales?
Option A. 100 shares
Why it is wrong: 100 is the member's overall net receipt, not the delivery for client net sales.
Option B. 1,100 shares
Why it is wrong: This adds every sale without netting each client's buys.
Option C. 750 shares
Why it is wrong: This adds the two net buyers' quantities.
Option D. 650 shares — Correct answer
Answer: D. Net each client first. B is a net seller of 400 and C of 250. A and D are net buyers. Delivery for net sales = 400 + 250 = 650 shares. Remember: Net within each client first, then add the client net-sell quantities for gross pay-in.
Hint, shown before you answer in practice mode: Common mistake: Treating the member’s net-receipt position as eliminating the gross client delivery requirement.
VII-146hardnumerical
Q17In one netted settlement of one share, client A buys 800 and sells 200, B buys 100 and sells 500, C buys 100 and sells 350, and D buys 200 and sells 50. What are the total shares due to net-buying clients, and the member's overall net shares to receive?
Option A. 600 shares and 100 shares
Why it is wrong: This leaves out D's 150 shares.
Option B. 750 shares and 100 shares — Correct answer
Option C. 750 shares and 750 shares
Why it is wrong: 750 is the net buyers' total, not the member's overall net.
Option D. 1,200 shares and 100 shares
Why it is wrong: 1,200 is total gross buying, not the net buyers' total.
Answer: B. A is a net buyer of 600 and D of 150, so net buyers are due 750. All buys total 1,200 and all sales 1,100, so the member nets 100 to receive. Remember: Reconcile client net-buy entitlements and client net-sell deliveries before reporting a member-level net figure.
Hint, shown before you answer in practice mode: Common mistake: Equating the member’s small net receipt with the entire quantity owed to its buying clients.
VII-147mediumnumerical
Clearing Process: common questions
How many practice questions are there on Clearing Process?
17 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 8 practice topics for NISM Series VII, which has 150 questions in total.
Are these real NISM Series VII questions on Clearing Process?
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 VII?
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.
Settlement Process
21 questions on Settlement Process. Its quiz opens on that unit.
Open Settlement Process