NISM Series XI · Unit 1 of 9 · about 7% of the paper
Indian securities markets: an overview: NISM Series XI notes and practice questions
Structure of the market, its instruments and participants.
What to know in Unit 1
- Primary and secondary markets.
- Exchanges, depositories, clearing corporations.
Key terms, examples and exam traps
Securities
Securities include shares, bonds, units of mutual funds and derivatives, as defined in the Securities Contracts (Regulation) Act.
Example. Shares and bonds are both examples.
Exam trap. This statement is false: Securities include only shares.
Primary and secondary market
New issues take place in the primary market; trading of already issued securities occurs in the secondary market.
Example. An IPO is a primary market event while daily trading is secondary.
Exam trap. This statement is false: The company receives money in secondary trades.
Stock exchange
A stock exchange is a recognised, regulated marketplace such as the BSE or NSE where securities trade electronically.
Example. Buyers and sellers are matched on an online system.
Exam trap. This statement is false: An exchange decides the profits of companies.
Trading member
A trading member is a broker admitted by the exchange who can trade on the platform for clients and own account.
Example. A SEBI-registered broker with exchange membership.
Exam trap. This statement is false: Any investor can be a trading member.
Depository
Depositories like NSDL and CDSL hold securities in electronic form through participants.
Example. A client's shares are held through a depository participant.
Exam trap. This statement is false: A depository is a type of stock exchange.
Clearing corporation
The clearing corporation guarantees and settles trades, becoming the central counterparty.
Example. It ensures delivery and payment for exchange trades.
Exam trap. This statement is false: The clearing corporation executes client orders.
Market segments
Exchanges offer segments for cash equity, equity derivatives, currency, commodity and debt trading.
Example. A client may trade shares in cash and futures in derivatives.
Exam trap. This statement is false: There is only a cash segment.
Retail and institutional participants
Participants include retail investors, high-net-worth individuals, mutual funds, FPIs, banks and insurers.
Example. Foreign portfolio investors and domestic mutual funds both trade.
Exam trap. This statement is false: Only retail investors trade on exchanges.
Dematerialisation
Dematerialisation converts paper certificates into electronic form, making trading and transfer faster and safer.
Example. A client's shares exist in electronic form.
Exam trap. This statement is false: Dematerialisation is the process of printing shares.
6 practice questions
Read each question and choose your answer before opening the free mock, which shows the correct answer and the reason.
Q1. Which term is described here? Depositories like NSDL and CDSL hold securities in electronic form through participants.
- Free-float method
- Depository
- Market turnover
- Qualified institutional buyer
Q2. Which statement best describes “Retail and institutional participants”?
- If the seller fails to deliver, the shortage is settled through an auction or closed out at a set price.
- Participants include retail investors, high-net-worth individuals, mutual funds, FPIs, banks and insurers.
- A merchant banker manages the issue process, due diligence and regulatory filings, and is registered with SEBI.
- The settlement guarantee fund is a pool maintained by the clearing corporation to complete settlement when a member defaults.
Q3. Which term is described here? Exchanges offer segments for cash equity, equity derivatives, currency, commodity and debt trading.
- Arbitration
- Market segments
- Listing timeline
- Sectoral and broad indices
Q4. Which statement best describes “Stock exchange”?
- The 52-week high and low are the highest and lowest prices in the past year, used as reference for momentum and risk.
- Client money and securities must be kept separate from the broker's own and cannot be used for proprietary trading.
- A stock exchange is a recognised, regulated marketplace such as the BSE or NSE where securities trade electronically.
- The minimum bid lot is the smallest number of shares that can be applied for, set so that the application value is within a prescribed range.
Q5. Which statement best describes “Securities”?
- SEBI can impose monetary penalties, bar participants from the market and prosecute those involved in abuse.
- Dematerialisation converts paper certificates into electronic form, making trading and transfer faster and safer.
- MTM margin covers notional losses on open positions based on current prices and is collected from the client.
- Securities include shares, bonds, units of mutual funds and derivatives, as defined in the Securities Contracts (Regulation) Act.
Q6. Which term is described here? A trading member is a broker admitted by the exchange who can trade on the platform for clients and own account.
- Sensex
- Promoter contribution and lock-in
- Trading member
- Exposure limit
Frequently asked questions
How much of NISM Series XI comes from Unit 1?
Unit 1 (Indian securities markets: an overview) usually carries about 7% of the questions. The whole exam has 100 questions and the pass mark is 50%.
What should I study in NISM Series XI Unit 1?
Primary and secondary markets. Exchanges, depositories, clearing corporations.
Are these NISM Series XI practice questions free?
Yes. Take the full free mocks to see the correct answer and the reason for every question.
Next
UpperCrust Academy is independent study material from UpperCrust Wealth. It is not affiliated with NISM, SEBI or AMFI. For education only. Not investment advice. Always confirm the latest syllabus and rules on the official NISM website.