NISM VIII Clearing and Settlement — Practice Questions
A heavily tested chapter. Practise the clearing corporation's role and novation, the initial, exposure and extreme-loss margin framework, SPAN, mark-to-market settlement, and the default waterfall.
121 questions on Clearing & Settlement in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- Clearing corporation and novation
- Initial, exposure and ELM margins
- SPAN margining
- Settlement and default handling
Free sample questions
1. On 3 September, ABC Ltd trades at Rs 620 in the cash market. Mr Sharma buys 2 September-expiry ABC futures contracts at Rs 628. The lot size is 800 and the initial margin is 12% of the contract value. Over the next two sessions the futures settle at Rs 616 and then Rs 641. He squares off the position at Rs 652.
What is the basis on 3 September, and what does it indicate?
- A. +Rs 8, indicating backwardation
- B. −Rs 8, indicating contango ✅
- C. +Rs 8, indicating contango
- D. −Rs 8, indicating backwardation
Answer: B — −Rs 8, indicating contango
Why: Basis is spot minus futures: 620 − 628 = −Rs 8. A negative basis means futures trade above spot, which is contango and the normal condition, reflecting the cost of carrying the underlying to expiry.
💡 BASIS = SPOT − FUTURES. Negative basis = contango = the normal case.
2. On 3 September, ABC Ltd trades at Rs 620 in the cash market. Mr Sharma buys 2 September-expiry ABC futures contracts at Rs 628. The lot size is 800 and the initial margin is 12% of the contract value. Over the next two sessions the futures settle at Rs 616 and then Rs 641. He squares off the position at Rs 652.
What initial margin must Mr Sharma deposit for the whole position?
- A. Rs 60,288
- B. Rs 1,20,576 ✅
- C. Rs 75,360
- D. Rs 30,144
Answer: B — Rs 1,20,576
Why: Contract value is 628 × 800 = Rs 5,02,400 per contract, and he holds 2, so Rs 10,04,800. At 12% the initial margin is Rs 1,20,576. Remember to multiply by the number of contracts, not just one lot.
💡 Margin = price × lot × contracts × margin %. Count the contracts.
3. On 3 September, ABC Ltd trades at Rs 620 in the cash market. Mr Sharma buys 2 September-expiry ABC futures contracts at Rs 628. The lot size is 800 and the initial margin is 12% of the contract value. Over the next two sessions the futures settle at Rs 616 and then Rs 641. He squares off the position at Rs 652.
On the first day the futures settle at Rs 616. His margin account is:
- A. Credited with Rs 19,200
- B. Debited with Rs 19,200 ✅
- C. Unchanged until expiry
- D. Debited with Rs 9,600
Answer: B — Debited with Rs 19,200
Why: He is long and the price fell from 628 to 616, a loss of Rs 12 per share. Across 800 units and 2 contracts that is 12 × 800 × 2 = Rs 19,200, debited from the margin account on that day's mark to market.
💡 Long and price down = margin DEBITED, and it is settled the same day.
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