NISM-XII

BY RISHABH GUPTA
SECURITIES LENDING AND BORROWING MECHANISM
(SLBM)
• SLBM involves borrowing securities on a temporary basis from a
lender for a fee.
• The contracts for borrowing and lending securities are listed on stock
exchanges.
• Lenders of securities benefit from earning risk-free income by lending
securities on the exchange platform.
• Lenders also enjoy protection of ownership rights, settlement
guarantee, and improved portfolio performance by earning additional
income.
 Market Information and Regulation

Market Size & • Market size refers to the total value or volume of securities traded within a
specific market.
Activity • It represents the overall scale and liquidity of the market.

Reading Market • Market prices represent the prevailing prices at which securities are bought
and sold in the market.
Prices • Market prices are determined by the forces of supply and demand.

Disclosures by • Listed companies are required to disclose certain information to the public as

Listed part of regulatory obligations.

• Disclosures provide transparency and enable investors to make informed

Companies
investment decisions.
 Risk Management Systems
CAPITAL ADEQUACY
NORMS
• These norms ensure that
institutions have sufficient capital
to absorb potential losses and
remain solvent.
• Capital adequacy norms typically
consider factors such as credit
risk, market risk, and operational
risk.
MARGINS AND PENALTIES
FOR SHORTFALL/DEFAULT
• Margins act as a buffer against
adverse price movements and
potential defaults.
• These measures discourage
excessive risk-taking and ensure
financial obligations are met.
CORE SETTLEMENT GUARANTEE
FUND (SGF)
• The SGF acts as a safety net to
guarantee settlement obligations
and absorb potential losses.
• Market participants contribute to
the SGF, which is utilized to
mitigate losses in case of member
defaults.
 RISK MANAGEMENT SYSTEMS
ON-LINE MONITORING OF
BROKERS’ POSITIONS
• Risk management systems involve
real-time monitoring of brokers'
positions by exchanges or
regulatory authorities.
• Early detection of abnormal
trading activities or risk breaches
allows for timely intervention and
risk mitigation measures.
PRICE MONITORING AND
ACTION
• Automated systems continuously
monitor market prices and
trading activities.
• Price monitoring systems
contribute to maintaining fair and
orderly markets and preventing
market abuse.
INSPECTION OF BOOKS
• Inspections of books refer to
regulatory examinations or audits
conducted on financial institutions
or market participants.
• Inspections involve a review of
financial records, transactions, risk
management policies, and internal
controls.