Top 50 NISM Series 6 Depository Operations Practice Questions with Answers

Are you preparing for the NISM Series 6 exam and looking for a focused study resource?
This article delivers exactly that: the Top 50 NISM Series 6 Depository Operations Practice Questions with Answers, designed to sharpen your understanding of depositary processes, settlement mechanics, and regulatory frameworks. Dive in, test your knowledge, and boost your confidence before the exam day.

Understanding the NISM Series 6 Exam

The NISM Series 6 exam tests knowledge of retail securities distribution and depository operations. It is essential for investment advisers and financial professionals who handle mutual funds, securities, and custodial services. Knowing the exam structure and key topics helps you allocate study time efficiently.

Exam Pattern & Syllabus Overview

Exam Pattern

Feature	Detail
Format	Multiple‑choice, 150 questions
Duration	2 hours
Difficulty	Moderate to advanced
Marking Scheme	+4 for correct, –1 for incorrect, 0 for unattempted

Syllabus Breakdown

Topic	Weightage
Depository Operations	35 %
Securities & Capital Market	25 %
Mutual Funds & Investment	20 %
Regulatory Framework	10 %
Ethical & Professional Conduct	10 %

Tip: Focus first on Depository Operations as it forms the backbone of the exam.

Weightage of Key Topics

Domain	% of Total Questions
Trade Settlement & T+2	12 %
Settlement Procedures	10 %
Custodial Services	8 %
Depository Participant Roles	7 %
Cash Settlement & Reconciliation	5 %
Regulatory Compliance	5 %
Others (Misc.)	3 %

Practical Study Tip

Create flashcards for each sub‑topic. The 10‑minute review session before bed cements procedural knowledge.

50 Practice Questions with Answers

1. Q: What is the standard settlement cycle for equity trades in India?
   A: T+2 (trade date + 2 business days).

2. Q: Which entity is responsible for clearing and settlement of securities in India?
   A: National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).

3. Q: What does the “depository participant” (DP) role entail?
   A: Acting as an intermediary between investors and depositories, facilitating opening, maintenance, and transfer of demat accounts.

4. Q: Which form is used for transferring securities between demat accounts?
   A: Demat Transfer Request (DTR) form.

5. Q: How many days are allowed for a DP to acknowledge a DTR?
   A: Within 48 hours of receipt.

6. Q: What is the “settlement instruction” (SI)?
   A: A document detailing the buy/sell instructions sent from a trader to the DP for settlement.

7. Q: Which rule governs the use of cash as settlement in equity markets?
   A: Rule 18 of the SEBI Regulations on Settlement Process.

8. Q: Which department approves the opening of a new demat account?
   A: The DP’s compliance and risk management team.

9. Q: What is the primary risk associated with T+1 settlement?
   A: Settlement risk due to reduced time for error correction.

10. Q: How is a “Cash Settlement” transaction processed?
    A: The buyer’s cash account is debited and the seller’s cash account credited on the settlement date.

11. Q: Which entity is responsible for maintaining the master.Feature on the depository?
    A: National Securities Depository Limited (NSDL).

12. Q: What does “T+0” signify in the context of settlement?
    A: Same‑day settlement; rarely used in India.

13. Q: Which of the following is NOT讯?
    A: (b) Real‑time settlement of derivatives. (Note: Derivatives settle on T+2.)

14. Q: What is “settlement fail(session)”?
    A: An event where securities or cash fails to be delivered between parties on the settlement date.

15. Q: Which body regulates the depository operations in India?
    A: Securities and Exchange Board of India (SEBI).

16.ригин Q: What is the “proprietary trading” risk in DP operations?
A: Losses arising from DP’s own trades affecting client positions.

17. Q: Which document is used to request a cancellation of a transfer?
    A: Transfer Cancellation Request (TCR) form.

18. Q: What is the “principle of substitution” in settlement?
    A: A substitute security can be delivered if the original fails.

19. Q: Which day is a non‑working day for settlement in the Indian market?
    A: Any public holiday declared by the RBI.

20. Q: What is the “Settlement Cycle” for bonds?
    A: T+5 (trade date + 5 business days).

21. Q: Which entity ensures the trade data integrity before settlement?
    A: Central Securities Depository (CSD) via its Trade Matching System.

22. Q: Which is the primary cause of “Non‑Delivery at Settlement” (NDS)?
    A: Inadequate securities or cash in the account.

23. Q: How does a “block trade” differ from a regular trade?
    A: Involves larger quantity, negotiated off‑book, settled on the same cycle.

24. Q: Which regulation mandates the segregation of client cash in a DP account?
    A: SEBI (DPs) Regulations, 2008.

25. Q: What is the “DSR” in settlement context?
    A: Delivery Settlement Ratio – the proportion of securities delivered vs. delivered.

26. Q: Which DP activity is monitored by the “DP Risk Management Committee”?
    A: Liquidity, market, and operational risk.

27. Q: What does “Non‑Cash Settlement” entail?
    A: Delivery of securities without accompanying cash exchange.

28. Q: Which system processes the settlement of każdy trade?
    A: The National Market System (NMS).

29. Q: What is the “preferred settlement method” for foreign securities?
    A: Cash settlement via a foreign bank.

30. Q: Which is the settlement date for an execution on 28‑Feb‑2024 (Saturday)?
    A: The next business day after the trade date, i.e., 2‑Mar‑2024.

31. Q: Which type of DP account holds securities in physical form?
    A: Demat account; securities are held electronically.

32. Q: What is the “Settlement Rule” for a deferred settlement?
    A: Settlements occur on the agreed future date, provided all conditions are met.

33. Q: Which entity must notify SEBI of a settlement failure?
    A: The defaulting DP.

34. Q: What does “Substitution” mean in a settlement failure scenario?
    A: Delivering a different security in place of the missing one.

35. Q: Which is a key component of the “DP Settlement System” (DPSS)?
    A: Real‑time monitoring of cash and securities balances.

36. Q: What is the "De‑liquidation" process?
    A: The process of converting securities into cash to meet settlement obligations.

37. Q: Which settlement rule applies toепутат?
    A: T+2 for equities; T+5 for bonds and hybrids.

38. Q: What is the “Settlement Cycle” for derivatives?
    A: T+2 for futures; T+3 for options.

39. Q: Which entity is responsible for posting margin in margin accounts?
    A: The DP or the clearing corporation.

40. Q: What is “Margin Call” in a DP context?
    A: Demand for additional funds to cover potential losses.

41. Q: Which is the primary function of the “NCC” (National Clearing Corporation)?
    A: Centralized clearing and settlement of derivatives.

42. Q: What does “Custody” refer to in securities handling?
    A: Safekeeping of securities in the depository.

43. Q: Which document records the details of a securities transaction?
    A: Trade Confirmation or Settlement Instruction.

44. Q: What is the “Settlement Window” for equities?
    A: 2 hours from 12:00 pm to 2:00 pm on the settlement day.

45. Q: Which regulatory body oversees DP operating norms?
    A: SEBI.

46. Q: What is “Dual Settlement” in cross‑border transactions?
    A: Simultaneous settlement of cash and securities in two jurisdictions.

47. Q: Which document captures the cancellation of a settlement instruction?
    A: Settlement Instruction Cancellation (SIC) form.

48. Q: What is the “Settlement Ledger” used for?
    A: Tracking all settlement entries for a client.

49. Q: Which factor affects the settlement risk for a DP?
    A: Liquidity position and counterparty exposure.

50. Q: What is the “Settlement Confirmation” process?
    A: Verification by the DP that securities and cash have been delivered successfully.

Actionable Tip: After solving each question, cross‑check the answer with the latest SEBI circulars to stay updated.

Practical Tips for Mastering Depository Operations

• Create a timeline chart of all settlement cycles and map them to real market days.
• Simulate a trade: Write down the trade, SI, DTR, and track the movement through the depository system.
• Use mnemonic devices: For example, “T‑2 for Equity, T‑5 for Bond” helps retention.
• Leverage mock exams: Time yourself and review incorrect answers to identify knowledge gaps.
• Join study groups: Discuss challenging concepts like “substitution” or “settlement fail” with peers.

Frequently Asked Questions

1. What is the main difference between a demat account and a physical securities account?
   The demat account holds securities electronically, while a physical account requires holding certificates in physical form.

2. Why does SEBI mandate a 48‑hour acknowledgment for DTRs?
   To ensure timely processing and reduce settlement risk.

3. Can a DP provide cash settlement for foreign securities?
   Yes, but it typically requires a foreign bankဥ.

4. What happens if a settlement fails on T+2?
   sources. The defaulting party must settle the arrears within a specified period, often incurring penalties.

5. Is T+2 settlement mandatory for all Indian securities?
   It applies to equities and most derivatives, but bonds settle on T+5.

6. How can I keep up with new SEBI regulations?
   Subscribe to SEBI’s official website, newsletter, and professional forums regularly.

Ready to Ace Your NISM Series 6 Exam?

Practice these 50 questions, review the answers, and test yourself with full‑length mock exams. Strengthen your understanding of depository operations, and walk into the exam with confidence. Start your mock test now and transform your preparation into success!