Risk Management
29 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 29 questions on Risk Management, with answers
Q1A Group I share has EWMA daily volatility of 1.2%. Under NSE Clearing's base VaR rule, what security VaR rate applies before any additional margin?
Option A. 9.0% — Correct answer
Option B. 7.2%
Why it is wrong: This calculates the volatility component but fails to apply the 9% floor.
Option C. 1.2%
Why it is wrong: This uses volatility directly without the multiplier or minimum.
Option D. 10.2%
Why it is wrong: This adds volatility to the floor instead of selecting the higher component.
Answer: A. The minimum exceeds the calculated component, so it determines the rate. The base rate is the higher of six times EWMA daily volatility and 9%. Volatility component = 6 × 1.2% = 7.2%. Base VaR = max(7.2%, 9%) = 9%. This result is a rate, not a rupee margin amount. Remember: Apply the maximum test after the volatility calculation.
Hint, shown before you answer in practice mode: Common mistake: Stopping at 7.2% without checking the minimum.
VII-016mediumnumerical
Q2A clearing member has a gross open position of ₹8,00,000 in an ordinary equity share in NSE Clearing's cash segment. What is the Extreme Loss Margin, excluding additional margins?
Option A. ₹8,000
Why it is wrong: ₹8,000 would result from using 1%, not the applicable rate.
Option B. ₹16,000
Why it is wrong: ₹16,000 uses 2%, which is not the ordinary-share rate tested.
Option C. ₹28,000 — Correct answer
Option D. ₹72,000
Why it is wrong: ₹72,000 uses 9%, confusing this ELM calculation with a VaR minimum.
Answer: C. ₹28,000 is 3.5% of the stated gross open position. The ELM rate for an ordinary share is 3.5%. ELM = position value × rate = ₹8,00,000 × 0.035 = ₹28,000. The result is the ELM component, not VaR plus ELM or the client's entire upfront collection. Remember: Identify the margin component before selecting its percentage.
Hint, shown before you answer in practice mode: Common mistake: Applying an ETF rate or a VaR rate to an ordinary-share ELM question.
VII-017mediumnumerical
Q3An ordinary retail client has a cash-market buy position of ₹6,00,000. Assume VaR is 11% and ELM is 3.5%, with no exemption or additional margin. Under NSE's minimum upfront client-collection requirement, how much must the trading member collect?
Option A. ₹87,000
Why it is wrong: ₹87,000 is the stated VaR-plus-ELM component, not the minimum client collection asked for.
Option B. ₹2,07,000
Why it is wrong: ₹2,07,000 double-counts by adding the component to the amount collected in its place.
Option C. ₹66,000
Why it is wrong: ₹66,000 includes the hypothetical 11% VaR alone.
Option D. ₹1,20,000 — Correct answer
Answer: D. ₹1,20,000 applies the 20% client-collection requirement to ₹6,00,000. VaR plus ELM under the stated hypothetical rates = 11% + 3.5% = 14.5%. That component is ₹6,00,000 × 0.145 = ₹87,000. The client-collection requirement being tested is a minimum of 20% in lieu of VaR and ELM. Required upfront client collection = ₹6,00,000 × 0.20 = ₹1,20,000. It is not ₹87,000 plus ₹1,20,000. Remember: First identify who collects the margin and which requirement the question asks you to calculate.
Hint, shown before you answer in practice mode: Common mistake: Answering every upfront-margin question by adding VaR and ELM, regardless of the client-collection rule.
VII-018hardnumerical
Q4A client buys 1,000 shares at ₹640. The closing price is ₹628, and the position remains unsettled. With no offsetting trade or other position, what is the mark-to-market loss?
Option A. ₹12
Why it is wrong: This is the loss on one share and omits the quantity.
Option B. ₹12,000 — Correct answer
Option C. ₹6,28,000
Why it is wrong: This is the closing value of the position, not the difference in value.
Option D. ₹6,40,000
Why it is wrong: This is the original purchase value, not the mark-to-market loss.
Answer: B. This multiplies the ₹12 adverse movement by all 1,000 shares. Loss per share = purchase price − closing price = ₹640 − ₹628 = ₹12. Total MTM loss = ₹12 × 1,000 = ₹12,000. The direction is a loss because the buyer's shares are marked at a lower price. This is not the full purchase consideration. Remember: Calculate the per-unit movement and then apply the position quantity.
Hint, shown before you answer in practice mode: Common mistake: Confusing the value of the position with the change in its value.
VII-019mediumnumerical
Q5What is the principal purpose of a clearing corporation's Core Settlement Guarantee Fund?
Option A. To support settlement when a clearing member defaults — Correct answer
Option B. To reimburse normal losses from an investor's price view
Why it is wrong: An investment losing value without a settlement default is a different risk.
Option C. To finance routine client purchases through the broker
Why it is wrong: Ordinary client purchase funding is not the purpose of the default resource.
Option D. To replace routine margin collection from clearing members
Why it is wrong: A settlement-default resource does not replace routine margin collection.
Answer: A. Supporting settlement during member default is the relevant function. A default can leave a settlement obligation unfulfilled. The Core SGF is part of the resources supporting completion of settlement. It is not a return-enhancement facility or a fund for normal adverse market movements. Remember: Connect Core SGF with settlement default, not with a promise about investment performance.
Hint, shown before you answer in practice mode: Common mistake: Confusing protection of settlement with reimbursement of every investor loss.
VII-020mediumconceptual
Q6Under NSE Clearing's Trade-for-Trade Surveillance provisions, what is the combined upfront VaR and ELM rate?
Option A. 20%
Why it is wrong: This confuses the ordinary client-collection baseline with the specified surveillance provision.
Option B. 9%
Why it is wrong: This imports a Group I base VaR minimum into the wrong context.
Option C. 100% — Correct answer
Option D. 12.5%
Why it is wrong: This adds routine rates rather than applying the special surveillance provision.
Answer: C. This is the combined VaR-and-ELM rate for the named surveillance segment. First identify the explicitly named surveillance segment. Its combined VaR and ELM is 100%. The question asks for this combined component, not whether MTM or another separate requirement can also arise. Remember: Read the segment label before applying a familiar margin percentage.
Hint, shown before you answer in practice mode: Common mistake: Using ordinary-share margin rules despite an explicit surveillance classification.
VII-021mediumregulatory
Q7A risk team compares its previously estimated margin cover with the losses that actually followed, and counts how often cover was insufficient. Which exercise is it performing?
Option A. Stress testing with assumed extreme shocks
Why it is wrong: The stem uses realised outcomes rather than assumed extreme shocks.
Option B. Reconciliation of bank settlement balances
Why it is wrong: It is not comparing a bank balance with an accounting ledger.
Option C. Backtesting the margin model — Correct answer
Option D. Collection of the current mark-to-market debit
Why it is wrong: Measuring model performance is different from collecting today’s debit.
Answer: C. This answer tests earlier margin estimates against subsequent actual outcomes. The team is comparing past estimates with actual market experience, rather than collecting a payment or balancing accounts. That comparison is backtesting. An exercise that instead imposes assumed extreme shocks would be a stress scenario, not the observed-outcome check described here. Remember: Past estimate versus realised result is a backtesting comparison.
Hint, shown before you answer in practice mode: Common mistake: Calling every risk-model evaluation stress testing.
VII-044mediumapplication
Q8A client pledges shares worth ₹1,50,000 as margin collateral. The broker applies a 20% haircut. What collateral value is accepted for these shares?
Option A. ₹30,000
Why it is wrong: ₹30,000 is the amount taken off, not the value accepted.
Option B. ₹1,50,000
Why it is wrong: This ignores the haircut.
Option C. ₹1,80,000
Why it is wrong: This adds the 20% instead of taking it off.
Option D. ₹1,20,000 — Correct answer
Answer: D. The haircut is taken off the market value. Haircut = ₹1,50,000 × 20% = ₹30,000. Accepted value = ₹1,50,000 − ₹30,000 = ₹1,20,000. Remember: Accepted collateral equals market value multiplied by one minus the haircut rate.
Hint, shown before you answer in practice mode: Common mistake: Reporting the haircut deduction instead of the adjusted value.
VII-046mediumnumerical
Q9A client has ₹80,000 cash and pledged shares worth ₹1,20,000 after haircut. Existing positions already block ₹1,20,000 of margin. The client wants to buy 600 shares at ₹500. The broker needs margin of 30% of order value. How much more cash does the client need?
Option A. ₹10,000 — Correct answer
Option B. Nil
Why it is wrong: This counts all ₹2,00,000 of collateral and forgets the ₹1,20,000 already blocked.
Option C. ₹90,000
Why it is wrong: ₹90,000 is the whole new requirement. It ignores the ₹80,000 already free.
Option D. ₹1,30,000
Why it is wrong: This leaves out the pledged shares as collateral.
Answer: A. Free margin is ₹80,000 + ₹1,20,000 − ₹1,20,000 = ₹80,000. The order needs 600 × ₹500 × 30% = ₹90,000. Extra cash needed = ₹90,000 − ₹80,000 = ₹10,000. Remember: Calculate available capacity and new margin separately, then compare them.
Hint, shown before you answer in practice mode: Common mistake: Using gross collateral before subtracting existing blocks.
VII-047hardnumerical
Q10Client R is short of margin. Client S has ₹50,000 of unused cash collateral with the same broker. May the broker use S's collateral to cover R's shortfall?
Option A. Yes, because unused collateral is shared across clients
Why it is wrong: Unused client collateral is not a shared pool.
Option B. No, S's collateral cannot be used for R — Correct answer
Option C. Yes, if the amount is returned before the next day
Why it is wrong: Promising to return it later does not make the misuse allowed.
Option D. Yes, if S has no open trades at present
Why it is wrong: S having no open trades does not move the money to R.
Answer: B. One client's money or securities can never cover another client's margin. The ₹50,000 belongs to S. Using the same broker does not make it R's collateral. Remember: Available collateral must belong to the correct client or other permitted resource category.
Hint, shown before you answer in practice mode: Common mistake: Assuming that idle collateral can be borrowed between client accounts.
VII-048mediumapplication
Q11A client has ₹80,000 of free margin. The broker needs margin of 30% of order value and caps any single order at ₹2,50,000. What is the largest whole-share buy order at ₹500 the client can place?
Option A. 500 shares — Correct answer
Option B. 533 shares
Why it is wrong: 533 shares meets the margin limit but costs ₹2,66,500, above the order cap.
Option C. 600 shares
Why it is wrong: 600 shares needs ₹90,000 margin and costs ₹3,00,000. It breaks both limits.
Option D. 160 shares
Why it is wrong: This pays the full price from the ₹80,000 instead of only 30% margin.
Answer: A. Both limits must be met, so the smaller one decides. Margin allows ₹80,000 ÷ (₹500 × 30%) = 533 shares. The order cap allows ₹2,50,000 ÷ ₹500 = 500 shares. The answer is 500 shares. Remember: Convert each limit into a maximum quantity, round down, then take the smaller result.
Hint, shown before you answer in practice mode: Common mistake: Passing one pre-trade check and assuming the order therefore passes every check.
VII-050hardnumerical
Q12The best bid is ₹199 and the best offer is ₹201. A 1,000-share market buy fills 500 shares at ₹201 and 500 at ₹205. What is its impact cost relative to the pre-trade midpoint, rounded to two decimals?
Option A. 1.00%
Why it is wrong: It expresses the ₹2 bid-offer spread as a percentage of ₹200, not the order’s impact cost.
Option B. 1.48%
Why it is wrong: It divides the ₹3 price deterioration by the ₹203 actual average instead of the ₹200 midpoint.
Option C. 2.01%
Why it is wrong: It compares ₹203 with the ₹199 best bid instead of the midpoint.
Option D. 1.50% — Correct answer
Answer: D. This answer uses the ₹200 midpoint and the ₹203 actual average execution price. Ideal price = (best bid + best offer) ÷ 2 = (₹199 + ₹201) ÷ 2 = ₹200. Actual average buy price = [(500 × ₹201) + (500 × ₹205)] ÷ 1,000 = ₹203. Buy impact cost = (actual average − ideal price) ÷ ideal price × 100 = (₹203 − ₹200) ÷ ₹200 × 100 = 1.50%. Remember: Find the midpoint and actual weighted fill before calculating impact cost.
Hint, shown before you answer in practice mode: Common mistake: Using the best offer, best bid or quoted spread instead of the specified ideal-price benchmark.
VII-059hardnumerical
Q13A pledged share is discontinued from NSE Clearing’s approved collateral list. It remains exchange-listed. What follows for a member using it as recognised collateral?
Option A. The old recognised value continues until the member sells it
Why it is wrong: A decision not to sell does not preserve the discontinued eligibility.
Option B. Its quoted market value becomes cash collateral automatically
Why it is wrong: A security does not turn into cash merely through a list revision.
Option C. The discontinued collateral must be replaced as required — Correct answer
Option D. Exchange listing alone preserves its collateral eligibility
Why it is wrong: Listing is not a substitute for inclusion on the approved collateral list.
Answer: C. Discontinued securities must be replaced with eligible collateral under the applicable requirements. Recognised collateral must satisfy the clearing corporation’s eligible-asset requirements. A member cannot preserve recognition merely because the security can still be traded. Follow the applicable discontinuation and replacement notice. Remember: Check the approved collateral list independently of trading eligibility.
Hint, shown before you answer in practice mode: Common mistake: Assuming that any listed share must be accepted as margin collateral.
VII-060mediumapplication
Q14A model reports a one-day 99% VaR of ₹2 lakh. Under that model’s assumptions, which interpretation is most appropriate?
Option A. The portfolio is expected to lose ₹2 lakh each day
Why it is wrong: VaR is not the expected daily loss.
Option B. A one-day loss above ₹2 lakh lies in the 1% tail — Correct answer
Option C. The loss cannot exceed ₹2 lakh on any day
Why it is wrong: A confidence threshold is not an absolute bound on losses.
Option D. Exactly one of the next 100 days must lose ₹2 lakh
Why it is wrong: A probability is not a fixed calendar schedule, and an exceedance is not an exact ₹2 lakh loss.
Answer: B. This answer states the model-based tail interpretation without claiming a guaranteed ceiling. The horizon is one day and the confidence level is 99%. The remaining tail probability is approximately 1%. Losses can exceed the threshold. The measure does not specify an average daily loss or schedule exactly when exceptions occur. Remember: Always retain the horizon, confidence level and possibility of losses beyond VaR.
Hint, shown before you answer in practice mode: Common mistake: Reading a modelled threshold as the worst loss that could ever occur.
VII-061mediumapplication
Q15A clearing corporation starts with a failure condition: available margins, Core SGF and other resources are insufficient. It then searches for market scenarios that could cause that condition. Which exercise is this?
Option A. Reverse stress testing — Correct answer
Option B. Routine margin backtesting
Why it is wrong: Backtesting compares past estimates with realised outcomes.
Option C. Daily mark-to-market calculation
Why it is wrong: Mark-to-market values positions. It does not search for failure scenarios.
Option D. Forward testing of a fixed price shock
Why it is wrong: Forward stress testing starts with a selected shock and evaluates its result.
Answer: A. This answer searches for the conditions under which resources would be insufficient. The starting point is insufficiency of resources, not a chosen market shock. The exercise identifies combinations of market conditions that would produce that failure. Remember: Reverse stress testing asks what would make the resources fail.
Hint, shown before you answer in practice mode: Common mistake: Confusing a search for failure conditions with testing one already chosen shock.
VII-062mediumapplication
Q16An example margin model takes 10% of the total absolute net position value, netting within each account and each share first. Alpha is valued at ₹400 and Beta at ₹100. Client R is net long 200 Alpha. Client S is net short 150 Alpha and net long 200 Beta. The own account is net long 50 Alpha and net short 50 Beta. What margin follows?
Option A. ₹18,500 — Correct answer
Option B. ₹5,500
Why it is wrong: This uses only the member's overall net of 100 Alpha and 150 Beta.
Option C. ₹26,000
Why it is wrong: This values Beta at the Alpha price of ₹400.
Option D. ₹16,000
Why it is wrong: This leaves out the own account's ₹25,000.
Answer: A. Add the absolute values account by account. R: 200 × ₹400 = ₹80,000. S: ₹60,000 + ₹20,000 = ₹80,000. Own account: ₹20,000 + ₹5,000 = ₹25,000. Total ₹1,85,000 × 10% = ₹18,500. Remember: Keep the level of netting consistent with the margin model being tested.
Hint, shown before you answer in practice mode: Common mistake: Using the smaller member-level settlement net as though it were every client’s gross margin exposure.
VII-073hardnumerical
Q17A clearing member has effective deposits of ₹4.80 crore, initial margin payable of ₹2.60 crore and Extreme Loss Margin payable of ₹0.70 crore. Under NSE Clearing’s equity-derivatives definition, what is its liquid net worth?
Option A. ₹2.20 crore
Why it is wrong: It deducts only initial margin and omits Extreme Loss Margin.
Option B. ₹4.10 crore
Why it is wrong: It deducts only Extreme Loss Margin and omits initial margin.
Option C. ₹1.50 crore — Correct answer
Option D. ₹3.30 crore
Why it is wrong: It adds the two margin amounts instead of calculating the residual deposits.
Answer: C. This answer deducts both initial margin and Extreme Loss Margin from effective deposits. Liquid net worth = effective deposits − initial margin payable − Extreme Loss Margin payable. Substitute: ₹4.80 crore − ₹2.60 crore − ₹0.70 crore = ₹1.50 crore. All amounts are in crore. The question asks for the calculated balance, not a minimum-capital compliance conclusion. Remember: For this definition, deduct both initial margin and ELM.
Hint, shown before you answer in practice mode: Common mistake: Remembering an initial-margin-only formula from a different context.
VII-084mediumnumerical
Q18A clearing member has ₹30 lakh eligible cash-component collateral and ₹50 lakh eligible non-cash collateral after haircuts. With cash required to be at least 50% of effective deposits and no other limits, what is the maximum effective deposit supported?
Option A. ₹80 lakh
Why it is wrong: It counts all collateral even though cash would form only 37.5%.
Option B. ₹60 lakh — Correct answer
Option C. ₹40 lakh
Why it is wrong: It halves the combined collateral rather than applying the cash-ratio constraint.
Option D. ₹30 lakh
Why it is wrong: It excludes the non-cash collateral that the cash component can support.
Answer: B. The ₹30 lakh cash component can support at most ₹30 lakh recognised non-cash collateral. Let recognised non-cash collateral be N. The requirement is ₹30 lakh ÷ (₹30 lakh + N) ≥ 50%. Therefore N cannot exceed ₹30 lakh, even though ₹50 lakh is available after haircuts. Maximum effective deposit = ₹30 lakh cash + ₹30 lakh non-cash = ₹60 lakh. The remaining ₹20 lakh of non-cash value is not supported by the present cash component. Remember: With a 50% minimum cash component, recognised non-cash cannot exceed the available cash component.
Hint, shown before you answer in practice mode: Common mistake: Adding all haircut-adjusted assets without checking the cash proportion.
VII-085hardnumerical
Q19A client's option trades need ₹16,000 initial margin and ₹6,000 ELM in cash. The client must also pay a net option premium of ₹5,200, which the margin does not include. The client has ₹25,000 of cash. How much more cash is needed?
Option A. Nil
Why it is wrong: This looks only at the ₹22,000 of margin and forgets the premium.
Option B. ₹5,200
Why it is wrong: This ignores the ₹3,000 left over after the margin is covered.
Option C. ₹2,200 — Correct answer
Option D. ₹27,200
Why it is wrong: This is the total need, before using the ₹25,000 the client already has.
Answer: C. Total cash needed = ₹16,000 + ₹6,000 + ₹5,200 = ₹27,200. The client has ₹25,000. Extra cash needed = ₹2,200. Remember: Check what a quoted margin already includes before adding a separately payable amount.
Hint, shown before you answer in practice mode: Common mistake: Ignoring the net premium or adding gross purchase premium without its offsetting receipts.
VII-099hardnumerical
Q20Two seasoned listed shares have the following six-month data. P traded on 90% of days with mean impact cost of 1.2%. Q traded on 70% of days with mean impact cost of 0.4%. With no new-listing exception, which NSE Clearing groups apply?
Option A. P: Group I. Q: Group I
Why it is wrong: P’s impact cost exceeds the Group I limit and Q fails the trading-frequency test.
Option B. P: Group II. Q: Group I
Why it is wrong: P is correctly classified, but Q’s low impact cost does not compensate for insufficient trading frequency.
Option C. P: Group II. Q: Group III — Correct answer
Option D. P: Group III. Q: Group II
Why it is wrong: P passes the frequency test, while Q does not qualify for the Group I/II pool.
Answer: C. P is Group II and Q is Group III. P meets the requirement of trading on at least 80% of days. Its impact cost exceeds 1%, so it is in Group II. Q fails the 80% trading-frequency condition. Its low impact cost does not overcome that failure, so it is in Group III. Remember: First test trading frequency, then use impact cost to separate Group I from Group II.
Hint, shown before you answer in practice mode: Common mistake: Classifying every low-impact-cost share as Group I without checking trading frequency.
VII-108mediumapplication
Q21Under SEBI’s risk-reduction-mode framework, which combination is required for a fresh margined order while the broker is in that mode?
Option A. DAY validity with sufficient margin
Why it is wrong: Sufficient margin does not remove the IOC-only validity condition.
Option B. IOC validity without a margin-sufficiency check
Why it is wrong: IOC validity does not remove the requirement to check margin sufficiency.
Option C. DAY validity only when the order reduces a position
Why it is wrong: Reducing a position does not make DAY validity the specified permitted validity.
Option D. IOC validity with a margin-sufficiency check — Correct answer
Answer: D. This answer includes both requirements. Paragraph 7 of the referenced framework permits fresh orders only with Immediate or Cancel validity. New orders must also pass the margin-sufficiency check. IOC validity alone is not a waiver of margin control. Remember: Check both time validity and margin sufficiency in the specified RRM framework.
Hint, shown before you answer in practice mode: Common mistake: Treating IOC as a substitute for margin control.
VII-109mediumregulatory
Q22A broker considers appointing a professionally qualified auditor who also owns and operates the controls being reviewed. Which concern most directly conflicts with the internal-audit safeguard?
Option A. The auditor understands the business too well
Why it is wrong: Business knowledge is useful and is not the independence defect described.
Option B. The auditor would be reviewing their own work — Correct answer
Option C. The auditor is capable of examining electronic records
Why it is wrong: Ability to inspect electronic records is not a conflict of interest.
Option D. The auditor’s report would contain control findings
Why it is wrong: Reporting control findings is an audit function, not a reason to reject independence.
Answer: B. Reviewing controls that the auditor operates creates the relevant conflict. The inspected SEBI provision calls for an independent qualified internal auditor without a conflict of interest. Operating the controls and auditing the same controls creates a self-review conflict. Remember: Check independence as well as professional qualification.
Hint, shown before you answer in practice mode: Common mistake: Assuming that qualification alone makes a person an appropriate independent auditor.
VII-110mediumapplication
Q23A client's short allocation of collateral is ₹6,000 at end of day. At two intraday snapshots it was ₹10,000 and ₹8,000. Which amount does NSE Clearing take as the short allocation for the penalty?
Option A. ₹6,000
Why it is wrong: This uses only the end-of-day figure.
Option B. ₹8,000
Why it is wrong: This is neither the highest nor the end-of-day figure.
Option C. ₹10,000 — Correct answer
Option D. ₹24,000
Why it is wrong: The figures are not added. Only the highest counts.
Answer: C. NSE Clearing takes the highest short allocation across the intraday snapshots and the end of day. Here that is ₹10,000. The amounts are not added together. Remember: Distinguish the shortfall base from the penalty amount.
Hint, shown before you answer in practice mode: Common mistake: Adding EOD, peak and allocation shortfalls together.
VII-111mediumregulatory
Q24A client started with ₹80,000 cash and is long 3 futures contracts. The broker blocks ₹20,000 cash margin for each open contract. A ₹6,000 mark-to-market loss has just been settled. How much more cash would the client need to buy one more contract?
Option A. Nil
Why it is wrong: This uses the original ₹80,000 and forgets the ₹6,000 loss.
Option B. ₹20,000
Why it is wrong: This ignores the ₹14,000 already free.
Option C. ₹6,000 — Correct answer
Option D. ₹26,000
Why it is wrong: This adds the loss to the full new margin.
Answer: C. Cash after the loss is ₹74,000. Three contracts block ₹60,000, so ₹14,000 is free. One more contract needs ₹20,000. Extra cash needed = ₹6,000. Remember: Update cash for settled MTM before calculating capacity for another trade.
Hint, shown before you answer in practice mode: Common mistake: Using the original collateral amount after a cash-settled loss.
VII-124hardnumerical
Q25For this exercise, a broker caps one issuer’s collateral at 25% of a fixed ₹12 lakh recognised collateral total. Issuer X contributes ₹4.2 lakh after haircuts. How much X collateral must be replaced by an equal recognised value of cash?
Option A. ₹3,00,000
Why it is wrong: It reports the permitted X balance, not the amount to replace.
Option B. ₹1,05,000
Why it is wrong: It applies 25% to X’s current balance instead of to the total collateral.
Option C. ₹1,20,000 — Correct answer
Option D. ₹4,20,000
Why it is wrong: It removes all X collateral although ₹3,00,000 is permitted under the stated cap.
Answer: C. This answer replaces only the ₹1,20,000 excess while preserving the denominator. Maximum recognised amount from X = ₹12,00,000 × 25% = ₹3,00,000. Current X contribution = ₹4,20,000. Excess = ₹4,20,000 − ₹3,00,000 = ₹1,20,000. Replacing ₹1,20,000 of X with equal recognised cash leaves total collateral at ₹12 lakh and X at exactly 25%. The 25% cap is an internal hypothetical condition, not a regulatory rate. All securities values are already after haircuts. Remember: Concentration excess equals current issuer exposure minus the permitted share of the specified total.
Hint, shown before you answer in practice mode: Common mistake: Changing the denominator by removing collateral when the question requires equal-value replacement.
VII-133mediumnumerical
Q26A simplified, already-weighted scenario array shows portfolio results of +₹8,000, −₹14,000, −₹23,000 and −₹9,000. What scanning-risk loss amount is selected before adding any other margin component?
Option A. ₹46,000
Why it is wrong: It adds the three alternative losses.
Option B. ₹23,000 — Correct answer
Option C. ₹54,000
Why it is wrong: It adds the absolute values of every result, including the gain.
Option D. ₹8,000
Why it is wrong: It selects the profitable scenario instead of the worst loss.
Answer: B. ₹23,000 is the largest scenario loss. The negative outcomes are losses of ₹14,000, ₹23,000 and ₹9,000. The largest loss is ₹23,000. The positive ₹8,000 outcome is a gain and is not the selected loss. These are alternative scenarios, so their losses are not accumulated as if they all occurred together. This four-row exercise illustrates the selection rule only. It is not the full production SPAN risk array or a complete margin calculation. Remember: Select the largest scenario loss when determining the scanning-risk component.
Hint, shown before you answer in practice mode: Common mistake: Adding mutually exclusive scenario losses instead of choosing the worst one.
VII-134mediumnumerical
Q27A trading system rejects limit orders priced outside an applicable ₹475–₹525 band. The band remains unchanged and no exception applies. What happens to a new buy limit order entered at ₹528?
Option A. Its limit is automatically reduced to ₹525.
Why it is wrong: Automatic repricing is not the rule stated.
Option B. It is automatically converted into a market order.
Why it is wrong: The system does not have permission in the scenario to change the order type.
Option C. It is held outside the book until the band changes.
Why it is wrong: The stated outcome is rejection rather than deferred entry.
Option D. It is rejected for an out-of-band limit price. — Correct answer
Answer: D. ₹528 exceeds the unchanged upper bound. The submitted limit is ₹528, above the allowed upper bound of ₹525. The question expressly states that out-of-band limit orders are rejected and that the band does not change. The order therefore fails validation. The possibility of a cheaper execution does not alter the submitted limit or the specified validation test. Remember: Check the entered limit against the permitted band before treating it as an executable order.
Hint, shown before you answer in practice mode: Common mistake: Assuming an invalid limit will automatically be repaired by the trading system.
VII-135mediumapplication
Q28A clearing member has SPAN requirement ₹72,000, delivery margins ₹18,000, margins on consolidated crystallized obligations ₹10,000 and ELM ₹6,000. Under NSE Clearing’s equity-derivatives definition, what is the initial margin requirement?
Option A. ₹72,000
Why it is wrong: It includes SPAN but omits both other components in the definition.
Option B. ₹90,000
Why it is wrong: It adds delivery margins but omits crystallized-obligation margins.
Option C. ₹1,00,000 — Correct answer
Option D. ₹1,06,000
Why it is wrong: It also adds ELM and answers a broader total than the one asked for.
Answer: C. This answer includes all three components of the specified initial-margin subtotal. Initial margin requirement = total SPAN requirement + delivery margins + margins on consolidated crystallized obligations. Substitute the stated components: ₹72,000 + ₹18,000 + ₹10,000 = ₹1,00,000. ELM is separately stated and is not added when answering this initial-margin-definition question. That does not make ELM unnecessary for other total-margin calculations. Remember: Identify the defined subtotal before adding every line of a margin statement.
Hint, shown before you answer in practice mode: Common mistake: Confusing initial margin with the aggregate of initial margin and ELM.
VII-136mediumnumerical
Q29A member is short of shares for its clients' net sales. Instead of delivering them to the clearing corporation, it sends the missing shares directly to the buying clients. How is that quantity treated?
Option A. As delivered, because the buying clients received the shares they had bought
Why it is wrong: Clients receiving shares outside clearing does not meet the pay-in.
Option B. As a short delivery, because it was not given to the clearing corporation — Correct answer
Option C. As set off against shares the member delivers in a later settlement
Why it is wrong: A shortage is not moved to a later settlement.
Option D. As covered by the member's funds pay-in made for the same settlement
Why it is wrong: Paying money does not replace delivering shares.
Answer: B. Pay-in obligations are met only by delivery to the clearing corporation. Shares sent outside clearing do not count, so the quantity stays a short delivery. Remember: Verify completion through the required settlement route, not only the intended beneficiary’s receipt.
Hint, shown before you answer in practice mode: Common mistake: Assuming a direct transfer outside clearing automatically removes a clearing-system shortage.
VII-150mediumapplication
Risk Management: common questions
How many practice questions are there on Risk Management?
29 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 Risk Management?
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.
Clearing Process
17 questions on Clearing Process. Its quiz opens on that unit.
Open Clearing Process