n NISM Certifications
X NISM Series X
Medium

What is the primary reason for imposing margins in securities trading?

Practice question from NISM Series XA- Investment Adviser (Level 1) Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    To fund the Investor Protection Fund

  2. B

    To generate exchange income

  3. To minimize damages from broker/client defaults

    Correct answer

  4. D

    To incentivize more trading

Why this is the answer

Margins act as collateral to ensure that defaults do not cause financial loss to the exchange or investors.

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