NISM Series XI · Unit 4 of 9 · about 5% of the paper
Secondary markets: NISM Series XI notes and practice questions
How the exchange market works for cash equity.
What to know in Unit 4
- Trading cycle and sessions.
- Market segments.
Key terms, examples and exam traps
Trading session
Regular equity trading takes place from 9:15 am to 3:30 pm, preceded by a pre-open session from 9:00 am to 9:15 am.
Example. An investor places an order at 11 am on a working day.
Exam trap. This statement is false: Equity trading runs all night.
Pre-open session
The pre-open session uses a call auction between 9:00 and 9:15 am to determine opening prices.
Example. An order is placed before the market opens to discover the opening price.
Exam trap. This statement is false: The pre-open session executes trades continuously.
Order matching
Orders are matched by price-time priority: best price first and, at the same price, earliest order first.
Example. An earlier bid at the same price is filled first.
Exam trap. This statement is false: Orders are matched by size alone.
Tick size
The tick size is the minimum price movement, generally ₹0.05 for equity shares.
Example. A price can change in steps of five paise.
Exam trap. This statement is false: Tick size is the number of shares in a lot.
Market lot
In the equity cash segment the market lot is one share, so investors can trade any quantity.
Example. An investor buys 7 shares of a company.
Exam trap. This statement is false: The cash segment requires a lot of 100 shares.
Trading segments
Segments include normal, trade-for-trade and surveillance-restricted ones, each with different conditions on trading.
Example. A stock in a restricted segment cannot be squared off intraday.
Exam trap. This statement is false: All stocks trade under the same conditions.
Types of trades
Trades are classified as delivery-based or intraday (squared off within the day), with different charges and margins.
Example. A client buys and sells within the day without taking delivery.
Exam trap. This statement is false: Intraday trades require delivery at the end of the day.
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 statement best describes “Trading session”?
- Regular equity trading takes place from 9:15 am to 3:30 pm, preceded by a pre-open session from 9:00 am to 9:15 am.
- Short selling means selling shares one does not own, with the obligation to deliver later; naked short selling is not allowed for delivery settlement.
- The clearing corporation guarantees and settles trades, becoming the central counterparty.
- Brokers must settle client funds and securities at regular intervals, monthly or quarterly as chosen by the client, unless the client specifies otherwise.
Q2. Which term is described here? Segments include normal, trade-for-trade and surveillance-restricted ones, each with different conditions on trading.
- VaR margin
- Trading segments
- SCRA 1956
- Underwriting
Q3. Which term is described here? Trades are classified as delivery-based or intraday (squared off within the day), with different charges and margins.
- SME IPO
- Contract note
- Types of trades
- Greenshoe option
Q4. Which term is described here? The tick size is the minimum price movement, generally ₹0.05 for equity shares.
- SEBI ICDR Regulations
- Promoter contribution and lock-in
- Suspicious transaction report
- Tick size
Q5. Which term is described here? In the equity cash segment the market lot is one share, so investors can trade any quantity.
- Investor charter
- Limit order
- Front running
- Market lot
Q6. Which statement about “Order matching” is correct?
- A clearing member advises clients on shares.
- Brokers may hide charges.
- Orders are matched by price-time priority: best price first and, at the same price, earliest order first.
- Orders are matched by size alone.
Frequently asked questions
How much of NISM Series XI comes from Unit 4?
Unit 4 (Secondary markets) usually carries about 5% of the questions. The whole exam has 100 questions and the pass mark is 50%.
What should I study in NISM Series XI Unit 4?
Trading cycle and sessions. Market segments.
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.
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