Question : What is the function of a custodian in the financial market?
Option 1: Issuing new securities
Option 2: Clearing and settling trades
Option 3: Regulating stock exchanges
Option 4: Trading foreign currencies
Correct Answer: Clearing and settling trades
Solution : The correct answer is (b) Clearing and settling trades.
The function of a custodian in the financial market is to provide clearing and settlement services for trades. A custodian is a financial institution or a specialized entity responsible for safeguarding and administering financial assets on behalf of its clients.Custodians play a crucial role in the post-trade process, which occurs after a trade is executed. They ensure the efficient and secure transfer of assets and funds between buyers and sellers.
Clearing: Custodians facilitate the clearing process by validating the trade details, reconciling instructions, and ensuring compliance with regulatory requirements. They help in the confirmation and matching of trade details between buyers and sellers.
Settlement: Custodians handle the settlement of trades by transferring the ownership of securities from the seller to the buyer and facilitating the transfer of funds. They ensure that securities are delivered to the buyer and payment is made to the seller in a timely manner.
Question : Which of the following is a function of the Reserve Bank of India (RBI)?
Option 1: Regulating the stock market
Option 2: Controlling inflation and monetary policy
Option 3: Issuing government bonds
Option 4: Regulating mutual funds
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