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NISM Securities Markets Foundation Certification Examination

Secondary Markets

Q1.

Secondary markets provide liquidity and marketability to existing securities.

False

True

Q2.

Which of the following is not correct about role & function of the Secondary Market?

Liquidity

Price Discovery

Market for Corporate Control

Information Signalling

None of the above

Q3.

(I) The more illiquid the market, the greater the trades and the fewer would be the bid-ask spread. (II) The core component of any secondary market is the stock exchange.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q4.

Which of the following statement is wrong about the advantages of a 3-in-1 account:

It reduces manual paperwork involving cheques, fund transfers, contract notes, account statements, order placement and hassles of branch banking transactions.

Less convenient as investor need to physically co-ordinate with the bank, broker and depository participant.

It enables efficient trading as the trading platform is linked through the broker’s terminals to the live market.

None of the above

Q5.

Power of Attorney is mandatory for opening a trading account with a broker; it is not required when an online 3-in-1 account is opened.

False

True

Q6.

The important features of an electronic trading systems are:

The system is order-driven.

All bid and ask prices can be seen on the screen, so that system is transparent.

There is complete anonymity of trading.

Both (a) & (b)

All (a), (b) & (c)

Q7.

The stock exchange conducts an inspection of the books of trading members of each market segment:

At least once a year

At least twice a year

At least once in 2 years

None of the above

Q8.

The base period for CNX Nifty is:

November 4, 1995

November 3, 1996

November 3, 1995

December 3, 1995

Q9.

Blue-chip stocks represent the largest companies by market cap that also enjoy a high level of liquidity.

True

False

Q10.

Mid cap stocks:

Represent the largest companies which enjoy a high level of liquidity.

Represent the medium companies which enjoy a good level of liquidity.

Represent the medium companies which do not enjoy much liquidity.

Represent the smaller companies which enjoy a good level of liquidity.

Q11.

(I) When a security is traded on cum basis, it means that it incorporates the benefit of the corporate action in its price. (II) When it goes ex-basis, the buyer no longer has the benefit of the corporate action.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q12.

Members are required to pay-in funds:

On the settlement day (T+1)

On the settlement day (T+2)

On the settlement day (T+3)

None of the above

Q13.

(I) If a member is not able to pay-in securities on the settlement day, it is known as a bad delivery. (II) If the shares are delivered but rejected by the depository for the technical reasons, it is a short delivery.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q14.

VaR margin is:

Used to measure the probability of loss of value in a stock over a period, based on an analysis of historical prices and volatility.

Used to measure the probability of gain of value in a stock over a period, based on an analysis of historical prices and volatility.

Used to measure the probability of loss of value in a stock over a period, based on an analysis of historical prices and tenor.

Used to measure the probability of gain of value in a stock over a period, based on an analysis of volatility and tenor.

Q15.

(I) Securities Pay-in: The process of receiving securities from the clearing corporation to effect settlement of a purchase transaction. (II) Securities Pay-out: The process of delivering securities to the clearing corporation to effect settlement of a sale transaction.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q16.

A trade can be settled in:

Day = T

Day = T+1

Day = T+2

Day = T+3

Q17.

Which of the following is the primary function of the secondary markets:

Provide liquidity for securities issued.

Enable investors to trade in stocks.

Provide a platform for making public issues.

Provide information about public companies.

Q18.

Market capitalization of a stock is impacted by:

Liquidity in the market

Changes in price of the stock

Changes of market index

Level of trading volumes

Q19.

Lower is the impact cost, lower is the liquidity and lower is the trading cost to the investor.

False

True

Q20.

A trade that is squared-off during the day

Is cancelled by the exchange

Is not guaranteed by the exchange

Does not require delivery of shares of funds

Is not considered in calculating trading volumes.

Q21.

The risk of default on obligations arising out of trading is controlled by the exchange by

Imposing circuit filters

Restricting types of investors

Blocking high value trades

Imposing margins

Q22.

The document that confirms a trade executed on the stock exchange is called

Confirmation slip

Contract note

Delivery note

Delivery instruction slip

Q23.

The base value of SX40 is:

1,000

10,000

1,00,000

100

Q24.

Market capitalization of a company is the number of shares outstanding multiplied by the market price per share.

True

False

Q25.

The gap between buying and selling prices is known as bid-ask spread.

False

True

Q26.

Which is not a participant of secondary market?

Regulator

Stock exchanges

Financial intermediaries

Issuers

None of the above

Q27.

What is off-market?

Investors do not enjoy the benefits of regulatory and redressal provisions of the law.

Investors enjoy the benefits of regulatory and redressal provisions of the law.

None of the above

Q28.

Which of the following phase/phases is correct in secondary market transaction?

Settlement

Clearing

Trading

All of the above

Q29.

(I) NSCCL is the clearinghouse for trades done on the BSE. (II) ICCL is the clearinghouse for trades done on the NSE.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q30.

Proprietary trades:

Brokers can trade on behalf of investor

Brokers can trade on their own account, using their own funds.

Both (a) & (b)

None of the above

Q31.

(I) The 3-in-1 account allows an investor to merge the savings bank, demat and trading account. (II) Brokers must not provide a duplicate or a certified true copy of the power of Attorney to the client after execution.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q32.

The fully automated computerized mode of trading on NSE is

BOLT

Open outcry

NEAT

None of the above

Q33.

International Securities Identification Number (ISIN) is a

Unique 10-digit number that identifies a security in the depository system

Unique 11-digit number that identifies a security in the depository system.

Unique 8-digit number that identifies a security in the depository system.

Unique 12-digit number that identifies a security in the depository system.

Q34.

(I) A day order is valid only until the end of the trading day on which it is placed. (II) A good till cancelled (GTC) order remains in the system until it is executed.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q35.

Which of the following specification is wrong in a contract note?

Should be signed by the authorized signatory of the trading member

May not be in the format prescribed by SEBI and stock exchanges

Must contain the unique client code and PAN of the client

Must contain the name, address and SEBI registration number of the trading member.

Q36.

The statutory charges on trading are:

Securities transaction tax

Service tax

Stamp duty

SEBI’s turnover tax

All of the above

Q37.

For delivery-based transactions, securities transaction tax (STT) is presently levied at:

0.1%

0.01%

0.2%

0.02%

Q38.

For non-delivery based transactions, STT is presently levied at:

0.25% (for seller only)

0.025% (for seller only)

0.25% (for both seller & buyer)

None of the above

Q39.

Service tax is charged on brokerage:

1.23%

0.123%

12.3%

10.3%

Q40.

SEBI imposes a turnover tax at the rate of:

0.01%

0.001%

0.0001%

0.1%

Q41.

Impact cost is a measure of the cost incurred due to the bid-ask spread.

True

False

Q42.

Approximately what percentage of turnover on the equity exchanges is usually squared off within the trading day is:

30%

50%

70%

90%

Q43.

(I) Funds Pay-in: The process of transfer of funds to the clearing corporation to pay for purchase transactions. (II) Funds Pay-out: The process of transfer of funds from the clearing corporation to complete the funds settlement of a sale transaction.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q44.

Which of the following is/are corporate actions:

Rights

Merge

Split

Both (a) & (b)

All (a), (b) & (c)

Q45.

Stocks that are included for trading in the futures market do not have a circuit breaker.

True

False

Q46.

(I) All trading in equity and equity derivatives markets is halted when circuit limits for the index are hit. (II) The trading halts are prescribed on the basis of the time and percentage amount of decline in the index.

Both the statements are wrong

Only statement (I) is correct

Only statement (II) is correct

Both the statements are correct

Q47.

Higher is the liquidity in the market, lower will be the turnover ratio.

True

False

Q48.

The base value of the Sensex was set at 100 on

Mar 1, 1979

Mar 1, 1978

Apr 1, 1979

Apr 1, 1978

Q49.

Under normal conditions, SEBI norms stipulate a Base Minimum capital (BMC) of

Rs. 10,000

Rs. 1,00,000

Rs. 10,00,000

Rs. 100,00,000

Q50.

The cash component of liquid assets has to be at least

50% of total liquid assets

30% of total liquid assets

60% of total liquid assets

40% of total liquid assets

Q51.

Which of the following statement is wrong?

Base minimum capital should be in liquid assets.

Margins are required to be made by members before the pay-in date in order to cover the possibility of default.

The clearing house is the counterparty to all trades in the stock exchange.

None of the above

Q52.

To address investor grievances, MCX-SX has

Investors’ Grievances Redressal Committee (IGRC)

Investor Services Cell (ISC)

Department of investors Services (DIS)

None of the above

Q53.

The process of arbitration is governed by the rules and regulations prescribed by SEBI and the exchange from time to time.

True

False

Q54.

Which of the following statement is wrong?

A market index tracks the market movement.

bMarket turnover of a stock indicates how much trading activity took place.

Market cap is also used as an indicator of the size.

None of the above.

Q55.

The extreme loss margin aims to cover the losses that could occur outside the coverage of VaR margins.

True

False

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