n NISM Certifications
NSM General NISM
Medium

The clearing corporation in India functions as the __________ for exchange-traded interest rate derivatives, providing a trade guarantee by becoming a party to each transaction.

Practice question from NISM Series IV - Mock Test 3 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. Central counterparty

    Correct answer

  2. B

    Custodian

  3. C

    Depository

  4. D

    Broker CORRECT ANSWER: Central counterparty

Why this is the answer

The Clearing Corporation acts as a central counterparty through a process called novation, becoming the buyer to every seller and vice versa, thus guaranteeing settlement.

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