Financial Abbreviations and Trading Terms Quiz
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Questions and Answers

What does the abbreviation ASBA stand for?

  • Application Scheme for Blocked Assets
  • Aggregate Submission for Blocked Applications
  • Application Supported by Blocked Amount (correct)
  • Authorized Securities by Blocked Account

Which of the following abbreviations is associated with a type of trading?

  • AT - Algorithmic Trading (correct)
  • CD - Credit Derivative
  • ADR - Arbitrage Dealing Rate
  • CSDL - Central Securities Depository Link

What is the primary function of the abbreviation CM in financial context?

  • Communication Model
  • Construction Manager
  • Capital Monitor
  • Clearing Member (correct)

Which of the following refers to the type of securities that can be traded on the Bombay Stock Exchange?

<p>BSE - Bombay Stock Exchange (D)</p> Signup and view all the answers

What does the abbreviation AON stand for in trading?

<p>All or None (D)</p> Signup and view all the answers

What does PAN stand for in the context of finance?

<p>Permanent Account Number (A)</p> Signup and view all the answers

Which of the following represents an order cancellation in trading?

<p>OCXL (A)</p> Signup and view all the answers

What does the acronym STT refer to?

<p>Securities Transaction Tax (D)</p> Signup and view all the answers

What is the meaning of the acronym VIX?

<p>Volatility Index (C)</p> Signup and view all the answers

Which term is used to describe the risk disclosure document?

<p>RDD (C)</p> Signup and view all the answers

What does the term OTC refer to in trading?

<p>Over The Counter (A)</p> Signup and view all the answers

What does the acronym T+2 represent?

<p>Two days after the trading day (A)</p> Signup and view all the answers

Which of the following is a key institution in regulating securities in India?

<p>SEBI (B)</p> Signup and view all the answers

What significant change was made to the trading cycle for stocks in December 2001?

<p>Transition to rolling settlement for all scrips (A)</p> Signup and view all the answers

What was the main objective of establishing the Securities and Exchange Board of India (SEBI)?

<p>To protect investor interests (D)</p> Signup and view all the answers

Which trading method replaced the open outcry system in Indian stock exchanges?

<p>Screen-based trading system (A)</p> Signup and view all the answers

What major reform in trading was implemented in April 2003?

<p>Reduction of settlement cycle to T+2 days (B)</p> Signup and view all the answers

What was the purpose of allowing trading in currency pairs such as Euro-INR and Pound Sterling-INR in February 2010?

<p>To diversify trading offerings in the market (B)</p> Signup and view all the answers

Which product was made available for trading in the Indian market as of August 31, 2009?

<p>Interest rate futures (D)</p> Signup and view all the answers

Which statement about the reduction of the trading cycle is true?

<p>The reduction aimed to standardize trading cycles across exchanges. (C)</p> Signup and view all the answers

In which year was the Securities and Exchange Board of India (SEBI) established?

<p>1992 (D)</p> Signup and view all the answers

Which scenario would lead to a trading member being declared a defaulter?

<p>A trading member fails to pay the Exchange any sum due. (D)</p> Signup and view all the answers

What action triggers the immediate withdrawal of trading facilities for a member?

<p>Receipt of information about their expulsion from another exchange. (D)</p> Signup and view all the answers

Under what condition can a trading member be declared a defaulter based on their financial status?

<p>If they file for insolvency. (A)</p> Signup and view all the answers

What must a trading member not do to avoid being declared a defaulter?

<p>Fail to deliver securities or assets owed to a defaulter's committee. (A)</p> Signup and view all the answers

Which of the following can NOT lead to a trading member's declaration as a defaulter?

<p>Receiving multiple customer complaints. (B)</p> Signup and view all the answers

What is required to declare a trading member as a defaulter if they are already under scrutiny by another exchange?

<p>A formal hearing must be provided. (D)</p> Signup and view all the answers

Which of the following is NOT considered a duty of a trading member?

<p>Disclosing inconsistencies in trading patterns. (B)</p> Signup and view all the answers

What is a consequence for a trading member who is declared a defaulter?

<p>Withdrawal of trading facilities immediately upon default notification. (A)</p> Signup and view all the answers

What is one condition for an unlisted corporate trading member to be included in the dominant promoter group?

<p>Holding 51% of shares individually or collectively (A)</p> Signup and view all the answers

Who is considered as a strategic investor in the context of unlisted corporate trading members?

<p>Corporates or individuals adding value through industry ties (A)</p> Signup and view all the answers

In the case of listed corporate trading members, who can be identified as a promoter?

<p>Persons identified in the offer document or shareholding pattern (B)</p> Signup and view all the answers

What is the purpose of interviewing dominant shareholders during the admission process?

<p>To assess their background and integrity (C)</p> Signup and view all the answers

Which of the following entities does not fall under the categories of dominant promoters?

<p>Private limited companies (B)</p> Signup and view all the answers

Under what condition can a person hold shares with relatives to meet the requirement for the dominant promoter group?

<p>As defined under Companies Act 2013 (C)</p> Signup and view all the answers

What is the minimum percentage of share ownership required by a single individual or group for an unlisted corporate trading member to establish a dominant promoter group?

<p>51% (D)</p> Signup and view all the answers

Which of the following best describes the role of the Membership Recommendation Committee (MRC)?

<p>To interview dominant shareholders for admission (C)</p> Signup and view all the answers

What is one reason a trading member may be required to suspend its business?

<p>Conducting business in a prejudicial manner (C)</p> Signup and view all the answers

Which of the following describes 'unwarrantable business'?

<p>Engaging in excessive purchases or sales given financial resources (C)</p> Signup and view all the answers

Under what condition might a trading member be suspended due to 'unsatisfactory financial condition'?

<p>When the trading member is in a state that threatens creditor safety (C)</p> Signup and view all the answers

What happens to a trading member's rights during a period of suspension?

<p>They are deprived of all membership rights (D)</p> Signup and view all the answers

What must occur for a trading member to have its suspension removed?

<p>It must meet any specified requirements by the relevant authority (D)</p> Signup and view all the answers

Which of the following is NOT a consequence of suspension for a trading member?

<p>Immediate liquidation of assets (A)</p> Signup and view all the answers

How does the suspension of a trading member affect its creditors?

<p>Creditor rights are unaffected (D)</p> Signup and view all the answers

What institution is responsible for suspending a trading member's business?

<p>The relevant authority (A)</p> Signup and view all the answers

Flashcards

ADs (Authorised Dealers)

Authorized Dealers are financial institutions permitted to deal in foreign exchange and other financial instruments.

Algorithmic Trading (AT)

Algorithmic Trading (AT) uses computer programs to execute trades based on pre-defined rules and strategies.

BSE (Bombay Stock Exchange)

The Bombay Stock Exchange (BSE) is one of the major stock exchanges in India.

CDSL (Central Depositories Services Ltd.)

Central Depositories Services Ltd. (CDSL) is a depository that holds and manages securities electronically.

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CADT (Client Allocation Details)

Client Allocation Details (CADT) provide information about how securities are allocated to clients during trades.

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What is the NSE?

The National Stock Exchange (NSE) is the largest stock exchange in India, primarily serving the equities, derivatives, and debt markets.

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What is a Negotiated Trade (NT)?

A negotiated trade occurs when two parties agree on a price and quantity for a security outside of the regular exchange system.

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What is the Odd Lot market (O)?

The Odd Lot market is a platform for trading securities in quantities less than the standard trading unit.

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What are Professional Clearing Members (PCMs)?

Professional Clearing Members (PCMs) are financial institutions authorized to clear and settle trades on behalf of their clients.

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What is a Trading Member (TM)?

The Trading Member (TM) is a member of the stock exchange that can execute trades on behalf of their clients.

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What is the Unique Client Code (UCC)?

The Unique Client Code (UCC) is a unique identifier assigned to each client participating in the stock market.

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What is the Securities Transaction Tax (STT)?

The Securities Transaction Tax (STT) is a tax levied on the transaction of securities in the stock market.

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What is T+2?

The Second day from the trading day is known as T+2, which is when the settlement of trades takes place.

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Dominant Promoter Group

A group of individuals or entities who have significant control over a trading member on the exchange, influencing its operations and decision making.

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Unlisted Corporate Trading Member

A trading member on the exchange that is not listed on any stock exchange (Publicly traded).

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Listed Corporate Trading Member

A trading member on the exchange that is listed on a stock exchange (Publicly traded).

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Promoter (for Listed Corporate)

Individuals or entities who are considered as "promoters" based on documents filed with the exchange, like shareholding information.

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Relatives (Companies Act definition)

A person's relative or close associate who may act as their representative or have control over their shares.

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Control (SEBI definition)

Individuals or entities that can exercise control over a company's operations, like major shareholders.

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Strategic Investors

Corporations or individuals who invest in companies, bringing valuable industry expertise and connections to raise capital.

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Membership Recommendation Committee (MRC)

A committee responsible for reviewing applications from companies wanting to join the stock exchange, including the assessment of Dominant Promoters.

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What is SEBI?

The Securities and Exchange Board of India (SEBI) is the primary regulatory body for the Indian securities market, established in 1992. It aims to protect investor interests, promote market development, and regulate market activities.

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What was the traditional trading system in India?

Prior to the establishment of NSE, the trading system in Indian stock exchanges used an open outcry method. This method was inefficient and time-consuming due to its lack of immediate trade matching and recording capabilities.

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How did NSE introduce efficiency to Indian markets?

The National Stock Exchange (NSE) of India introduced a nationwide, online, and fully automated screen-based trading system (SBTS) in 1994 to improve efficiency, liquidity, and transparency in the market.

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What was the earlier trading cycle like in India?

Before the reforms, the trading cycle in the Indian stock market varied widely, from 14 to 30 days, and settlement often took another two weeks. This led to inconsistent trading cycles across different exchanges.

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How was the trading cycle reformed?

All stock exchanges in India were mandated to follow a uniform weekly trading cycle. To further improve efficiency, rolling settlement was adopted, and the settlement period was reduced progressively from T+5 to T+2 days. Today, a T+2 settlement cycle is followed.

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How did the introduction of equity derivatives improve risk management?

To enable effective risk management for market participants through hedging, speculation, and arbitrage, the Securities Contracts (Regulation) Act was amended in 1995 to allow options trading in securities.

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Why were interest rate futures introduced?

The introduction of interest rate futures trading in 2009 allowed market participants to manage interest rate risk. This helped to bring more stability to the market and provide more options for investors.

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What new currency pairs were introduced for trading?

In 2010, trading in currency pairs like Euro-INR, Pound Sterling-INR, and Japanese Yen-INR was made available, allowing investors to trade directly in these foreign currencies.

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What is suspension of trading for a member?

A trading member can be required to pause their trading activities if they are found to be conducting business in a way that harms the exchange, such as manipulating market prices or engaging in excessive trading.

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What situations lead to a trading member suspension?

This occurs when a member is suspected of engaging in activities that might jeopardize the financial health of the exchange or its clients.

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How can a suspended trading member resume business?

The trading member can resume trading once they meet the requirements set by the relevant authority, such as providing a deposit or resolving issues that led to the suspension.

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What are the consequences of suspension for a trading member?

During a suspension, a trading member loses their rights and privileges, including the ability to vote or participate in meetings of the exchange.

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What happens to contracts of a suspended trading member?

A suspended trading member must still fulfill any outstanding commitments it has made before being suspended.

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What happens to the rights of creditors with a suspended member?

This rule ensures that creditors of a suspended trading member are not negatively impacted by the suspension.

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Who has authority to suspend a trading member?

The relevant authority oversees the trading activity and can take measures to ensure fair and orderly operations.

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What powers does the relevant authority have?

The relevant authority is empowered to investigate and act upon situations that threaten the smooth functioning of the exchange.

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What is the overall purpose of suspension rules?

This ensures that trading members are responsible for their actions and are held accountable for potential risks to the market.

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Trading Member (TM)

A member of a stock exchange who can execute trades on behalf of their clients.

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Declared Defaulter

A trading member is declared a defaulter if they fail to meet their financial obligations to the exchange or other trading members.

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Failing to pay after a closing-out

A trading member may be declared a defaulter if they are unable to pay the price difference due on a closing-out action taken against them.

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Failing to submit required documents

A trading member may be declared a defaulter if they fail to deliver securities or statements to the exchange on time.

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Failing to comply with arbitration

A trading member may be declared a defaulter if they fail to abide by arbitration proceedings.

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Authorized Persons

Trading members can appoint authorized individuals to act on their behalf within the exchange.

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Expulsion due to other exchange actions

If a trading member is expelled from another exchange or has their registration certificate cancelled by SEBI, they may be expelled from the current exchange.

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Immediate withdrawal of trading facilities

A member's trading facilities are immediately withdrawn if they are expelled or declared a defaulter by another exchange or if their registration is cancelled by SEBI.

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Study Notes

NSE Academy Course Information

  • Course name: FMM - Financial Markets Management
  • Skill Education
  • Central Board of Secondary Education
  • Class XII

Financial Markets Management

  • Course name: Financial Markets Management
  • Class: XII
  • Skill Education
  • Central Board of Secondary Education

Preface and About NSE Academy

  • NSE Academy is a subsidiary of NSE
  • NSE Academy provides financial courses for students from VIII to MBA level.
  • They partner with top educational institutes.
  • Mission: spreading financial literacy for all.
  • Facilitated over 41.8 lakh individuals learn about financial matters.
  • NCFM (NSE Academy’s Certification in Financial Markets) is an online certification program.
  • Program covers Basic to Advanced levels.
  • Has over 154+ testing centers in the country.
  • Online Registration for NCFM can be done through nseindia.com
  • Offline registration is also possible through nseindia.com

Contents of the Course

  • Introduction to Indian Securities Market and Trading Membership
  • Trading
  • Clearing, Settlement and Legal Framework
  • Introduction to Derivatives
  • Introduction to Futures and Options
  • Sample Papers

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Financial Markets Management Class XII PDF

Description

Test your knowledge on financial abbreviations and trading terminology with this engaging quiz. Covering key concepts like ASBA, CM, and SEBI, this quiz is perfect for finance enthusiasts. Challenge yourself to see how well you understand the world of trading and securities.

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