Question

What happens in case of short delivery of securities by clearing members?

• A. The NSCCL conducts a buying-in auction.
• B. The transaction is voided automatically.
• C. Clearing banks cover the shortfall.
• D. RBI intervenes to resolve the issue.

Hint:

Short delivery leads to a buying-in auction by NSCCL to maintain timely settlement and market integrity.

Answer 1

The Correct Option is A

In NSCCL's settlement process, a clearing member's failure to deliver obligated securities, termed short delivery, triggers a buying-in auction by NSCCL. This auction entails: Purchasing the deficient securities from the market. Billing the defaulting clearing member for the incurred buy-in cost. This procedure guarantees timely settlement fulfillment, reinforcing market discipline and investor trust. Explanation of Other Options: (B) Transaction is voided automatically: Incorrect. Transactions are enforced, not voided. (C) Clearing banks cover the shortfall: Clearing banks handle fund settlement, not securities delivery shortfalls. (D) RBI intervenes: The RBI does not intervene in routine securities settlement shortfalls. Therefore, option (A) is the correct answer.