NISM-Series-VII-SORM workbook-January 2020 PDF
| Title | NISM-Series-VII-SORM workbook-January 2020 |
|---|---|
| Author | Reeva sinha |
| Course | bachlor of commerce |
| Institution | University of Mumbai |
| Pages | 137 |
| File Size | 3.1 MB |
| File Type | |
| Total Downloads | 41 |
| Total Views | 124 |
Summary
NISM Certificate ...
Description
VII
Securities Operations and Risk Management
NISM Certification on Securities Operations and Risk Management – Workbook
Workbook for NISM‐Series‐VII:SecuritiesOperationsandRiskManagement CertificationExamination
National Institute of Securities Markets www.nism.ac.in
NISM Certification on Securities Operations and Risk Management – Workbook
This workbook has been developed to assist candidates in preparing for the National InstituteofSecuritiesMarkets(NISM)CertificationExaminationforSecuritiesOperations andRiskManagement. WorkbookVersion:January2020 Publishedby: NationalInstituteofSecuritiesMarkets ©NationalInstituteofSecuritiesMarkets,2020 Plot82,Sector17,Vashi NaviMumbai–400705,India Allrightsreserved.Reproductionofthispublicationinanyformwithoutpriorpermissionof thepublishersisstrictlyprohibited.
NISM Certification on Securities Operations and Risk Management – Workbook
Foreword NISMisaleadingproviderofhighendprofessionaleducation,certifications,training and researchinfinancialmarkets.NISMengagesincapacitybuildingamongstakeholdersinthe securitiesmarketsthroughprofessionaleducation,financialliteracy,enhancinggovernance standards and fostering policy research. NISM works closely with all financial sector regulatorsintheareaoffinancialeducation. NISM Certification programs aim to enhance the quality and standards of professionals employed in various segments of the financial services sector. NISM’s School for CertificationofIntermediaries(SCI)developsandconductscertificationexaminations and Continuing Professional Education (CPE) programs that aim to ensure that professionals meet the defined minimum common knowledge benchmark for various critical market functions. NISMcertificationexaminationsandeducationalprogramscatertodifferentsegmentsof intermediariesfocusingonvariedproductlinesandfunctional areas.NISMCertifications haveestablishedknowledgebenchmarksforvariousmarketproductsandfunctionssuchas Equities,MutualFunds,Derivatives,Compliance,Operations,AdvisoryandResearch. NISMcertificationexaminationsandtrainingprogramsprovide astructuredlearningplan andcareerpathtostudentsandjobaspirantswhowishtomakeaprofessionalcareerinthe Securitiesmarkets.TillMarch2019,NISMhascertifiednearly8lakhindividualsthroughits CertificationExaminationsandCPEPrograms. NISM supports candidates by providing lucid and focused workbooks that assist them in understanding the subject and preparing for NISM Examinations. This book covers all importantaspectsrelatedtothestockbrokersoperations,startingfromclienton‐boarding totradelifecycleand includes compliance requirementsrelated toreportsubmissionand redressalofinvestorgrievances.Thisbook will beimmensely useful toall those whowant tolearn aboutthevariousfunctionsofabrokersoperationsandriskmanagementin the securitiesmarkets. SKMohanty Director
NISM Certification on Securities Operations and Risk Management – Workbook
Disclaimer The contents of this publication do not necessarily constitute or imply its endorsement, recommendation,orfavoringbytheNationalInstitute of SecuritiesMarket(NISM) orthe SecuritiesandExchangeBoardofIndia(SEBI).Thispublicationismeantforgeneralreading andeducationalpurposeonly. Thestatements/explanations/conceptsareofgeneralnatureandmaynothavetakeninto account the particular objective/ move/ aim/ need/ circumstances of individual user/ reader/organization/institute.ThusNISMandSEBIdonotassumeany responsibilityfor anywrongmoveoractiontakenbasedontheinformationavailableinthispublication. Therefore before acting on or following the steps suggested on any theme or before followinganyrecommendationgiveninthispublicationuser/readershouldconsider/seek professionaladvice. The publication contains information, statements, opinions, statistics and materials that havebeenobtainedfromsourcesbelievedtobereliableandthepublishersofthistitlehave made best efforts to avoid any errors. However, publishers of this material offer no guaranteesandwarrantiesofanykindtothereaders/usersoftheinformationcontainedin thispublication. Sincetheworkandresearchisstillgoingoninalltheseknowledgestreams,NISMandSEBI do not warrant the totality and absolute accuracy, adequacy or completeness of this informationandmaterialandexpressly disclaimany liabilityfor errorsor omissionsinthis informationandmaterialherein.NISM andSEBIdonotaccept anylegalliabilitywhatso everbasedonanyinformationcontainedherein. WhiletheNISMCertificationexaminationwillbelargelybasedonmaterialinthisworkbook, NISMdoesnotguaranteethatallquestionsintheexaminationwillbefrommaterialcovered herein. Acknowledgement This workbook has been developed and reviewed by the Certification team of NISM in coordinationwithitssubjectmatterexperts.NISMgratefullyacknowledgesthecontribution of the Examination Committee of NISM Series VII: Securities Operations and Risk Management Certification Examination consisting of representatives from the Indian SecuritiesMarketandIndustryExperts. AboutNISMCertifications TheSchoolforCertificationofIntermediaries (SCI)atNISMisengaged indevelopingand administeringCertificationExaminationsandCPEProgramsfor professionalsemployedin
NISM Certification on Securities Operations and Risk Management – Workbook
varioussegmentsoftheIndiansecuritiesmarkets.TheseCertifications andCPEPrograms arebeingdevelopedandadministeredbyNISMasmandatedunderSecuritiesandExchange BoardofIndia(Certification ofAssociatedPersonsintheSecuritiesMarkets)Regulations, 2007. The skills, expertise and ethics of professionals in the securities markets are crucial in providingeffectiveintermediationtoinvestorsandinincreasingtheinvestorconfidencein marketsystemsandprocesses.TheSchoolforCertificationofIntermediaries(SCI)seeksto ensurethatmarketintermediariesmeetdefinedminimumcommonbenchmarkofrequired functional knowledge through Certification Examinations and Continuing Professional Education Programmes on Mutual Funds, Equities, Derivatives Securities Operations, Compliance,ResearchAnalysis,InvestmentAdviceandmanymore. Certification creates quality market professionals and catalyzes greater investor participationinthemarkets.Certificationalsoprovidesstructuredcareerpathstostudents andjobaspirantsinthesecuritiesmarkets.
NISM Certification on Securities Operations and Risk Management – Workbook
AbouttheCertificationExaminationonSecuritiesOperationsandRiskManagement The examination seeks to create a common minimum knowledge benchmark as the requisitestandardforassociatedpersonsofaregisteredstock‐broker /tradingmember/ clearingmemberinrecognizedstockexchanges,involvedin (a)assetsor fundsofinvestor orclients(b)redressal ofinvestorgrievances,(c)internalcontrolorriskmanagementand (d)activitieshavingabearingonoperationalrisk. ExaminationObjectives Onsuccessfulcompletionoftheexamination,thecandidateshould: KnowthebasicsoftheIndiansecuritiesmarket, thedifferentproductstradedand the various market participants and the respective roles they play in the Indian securitiesmarket. UnderstandtheregulatoryframeworkandtheroleoftheSecuritiesExchangeBoard ofIndia. Understandthetradelifecycle,thestepsandparticipantsinvolvedinthetradelife cycle. Knowthevariousfunctionsof theFrontOffice,MiddleOfficeandBackOfficein a SecuritiesBrokingFirm. Understandhowtherisksaremanagedinasecuritiesbrokingfirm,theclearingand settlementprocess. Understandthevariousproceduresforredressofinvestorgrievances AssessmentStructure Theexamination consists of100questions of 1 mark eachandshouldbecompleted in 2 hours.Thepassingscoreontheexaminationis50%.Thereshallbenegativemarkingof25% ofthemarksassignedtoaquestion. ExaminationStructure Theexam coversknowledgecompetenciesrelated to the basics ofsecurities market,the tradelifecycle,knowledgeaboutthefunctioningofthefrontoffice,middleofficeandback office in a broking firm. The risk management practices and the clearing and settlement processforatradeexecutedinthesecondarymarket. Howtoregisterandtaketheexamination Tofindoutmoreandregisterfortheexaminationpleasevisitwww.nism.ac.in
NISM Certification on Securities Operations and Risk Management – Workbook
TABLEOFCONTENTS CHAPTER1:INTRODUCTIONTOTHESECURITIESMARKET...............................................................................9 1.1INTRODUCTION..........................................................................................................................................9 1.2SECURITIESMARKET.................................................................................................................................10 1.3MONEYMARKETS....................................................................................................................................11 1.4PRODUCTSTRADEDINTHEINDIANSECURITIESMARKET....................................................................................11 1.5INTERNATIONALFINANCIALSERVICESCENTRES(IFSC)......................................................................................16 CHAPTER2:MARKETPARTICIPANTSINTHESECURITIESMARKET..................................................................19 2.1INTRODUCTION........................................................................................................................................19 2.2INVESTORS..............................................................................................................................................19 2.3ISSUERS..................................................................................................................................................20 2.4MARKETSTRUCTUREANDPARTICIPANTS.......................................................................................................22 2.5REGULATORS...........................................................................................................................................26 CHAPTER3:INTRODUCTIONTOSECURITIESBROKINGOPERATIONS.............................................................41 3.1INTRODUCTIONTOTHETRADELIFECYCLE......................................................................................................41 3.2FRONTOFFICEOPERATIONS.......................................................................................................................47 3.3MIDDLEOFFICEOPERATIONS......................................................................................................................58 3.4BACKOFFICEOPERATIONS.........................................................................................................................60 CHAPTER4:RISKMANAGEMENT...................................................................................................................68 4.1RISKMANAGEMENT............................................................................................................................... ...68 4.2COMPLIANCESANDREGULATORYREPORTING.................................................................................................83 4.3CORESETTLEMENTGUARANTEEFUND..........................................................................................................87 CHAPTER5:CLEARINGPROCESS....................................................................................................................91 5.1INTRODUCTION........................................................................................................................................91 5.2ROLEOFTHECLEARINGCORPORATION‐INTEROPERABILITY..............................................................................91 5.3CLEARINGBANKSANDTHEIRFUNCTION.........................................................................................................93 5.4CLEARINGMEMBERS/CUSTODIANS..............................................................................................................93 5.5DEPOSITORIES&DEPOSITORYPARTICIPANTS..................................................................................................94 5.5CLEARINGPROCESS...................................................................................................................................96 CHAPTER6:SETTLEMENTPROCESS.............................................................................................................100 6.1INTRODUCTION......................................................................................................................................100 6.2DETERMINATIONOFSETTLEMENTOBLIGATIONS‐EQUITYSEGMENT....................................................................100 6.3SETTLEMENTOFFUNDS...........................................................................................................................102 6.4SETTLEMENTOFSECURITIES......................................................................................................................104 6.5AUCTIONOFSECURITIES..........................................................................................................................105 6.6CORPORATEACTIONSADJUSTMENT...........................................................................................................107 CHAPTER7:INVESTORGRIEVANCESANDARBITRATION..............................................................................111 7.1INTRODUCTION.......................................................................................................................................111 7.2INVESTORGRIEVANCE..............................................................................................................................111 7.3INVESTORPROTECTIONFUND...................................................................................................................114 7.4ARBITRATION........................................................................................................................................114 CHAPTER8:OTHERSERVICESPROVIDEDBYBROKERS.................................................................................119 8.1INTRODUCTION......................................................................................................................................119 8.2IPOAPPLICATIONS.................................................................................................................................120 8.3TRADINGOFMUTUALFUNDUNITS............................................................................................................122 8.4PORTFOLIOMANAGEMENTSERVICE...........................................................................................................124
NISM Certification on Securities Operations and Risk Management – Workbook
8.5RESEARCHREPORTS................................................................................................................................126 8.6DEPOSITORYSERVICES. ............................................................................................................................127 8.7MARGINTRADING..................................................................................................................................127 8.8INTERNETBASEDTRADING(IBT)&SECURITIESTRADINGUSINGWIRELESSTECHNOLOGY(STWT)...........................130 ANNEXURE1:GOODPRACTICESFORBROKERS...........................................................................................132
NISM Certification on Securities Operations and Risk Management – Workbook
CHAPTER1:INTRODUCTIONTOTHESECURITIESMARKET
LEARNINGOBJECTIVES: Afterstudyingthischapter,youshouldknowabout: MeaningofsecuritiesmarketanditsroleintheIndianEconomy Thedifferentsegmentsofsecuritiesmarket ProductstradedinIndiansecuritiesmarket ConceptofInternationalFinancialServicesCentres(IFSC)
1.1Introduction The financial markets enable efficient transfer and allocation of financial resources for productiveactivitiesintheeconomy. Usersof fundsinclude businesses, governmentsand householdswhoseekfundstoruntheiractivities.Households,businessesandgovernments alsoactasprovidersofsurplusfunds.Intermediariessuchasbanks,financialinstitutions, mutual funds and insurance companies, among others, channelize the available surplus fundsfromlenderstotheusers. The function of the financial markets is to ensure that economic activity is enabled by providingaccessoffundstothosewhoneeditforconsumptionorproductiveactivity.They provide a way for aggregation of funds from a large number of investors and make it available for productive economic activity. In the absence of financial markets such aggregationmaynotbepossible.Anefficientfinancialmarketensuresthatthetransferof fundshappensatacostthatmakesitattractiveforsaverstosaveandlendandforusersto borrowfunds.Themarketsmustenablethedisseminationofrelevantinformationtoallthe participantsinthemarketsothatthedecisiononpriceoffundsismadeafterintegratingall availableinformation.Itmustalsoallowtheparticipantstoreviewtheirfundingdecisions givennewinformationandtore‐allocatetheresourcesaccordingly. Therefore,providing liquidityandexitoptionsareanimportant functionoffinancialmarkets.Financialmarket regulationsandregulatorsfocusonsettingupsystemsandprocessesinplacetostreamline the activitiesassociatedwiththetransferoffunds.Thefinancialmarket comprises ofthe moneymarketandthesecuritiesmarkets. In this book however, we are going to focus specifically on securities market. The term “Securities”asdefinedintheSCRA,1956includesthefollowing: i.Shares,scrips,stocks,bonds,debentures,debenturestockorothermarketablesecurities ofalikenatureinorofanyincorporatedcompanyorotherbodycorporate; ii.Derivatives; iii.UnitsoranyotherinstrumentissuedbyanyCollectiveInvestmentScheme; iv. SecurityreceiptasdefinedintheSecuritisationand ReconstructionofFinancialAssets andEnforcementofSecurityInterestAct,2002; v. Units or any other such instrument issued to the investors under any mutual fund scheme;
NISM Certification on Securities Operations and Risk Management – Workbook
vi. Anycertificateorinstrument,issuedtoaninvestorbyanyissuerbeingaspecialpurpose distinctentitywhichpossessesany...
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