Top 50 Questions on NISM Series VII Securities Operations

Your ultimate guide to ace the NISM Series VII exam with proven strategies, concise answers, and expert tips.

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Why This List Matters

• Focus: Directly aligns with the exam syllabus and most‑asked topics.
• Efficiency: Saves hours of study time by covering the exact questions candidates face.
• Confidence: Knowing the answers boosts performance and reduces exam anxiety.

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Quick Reference Table

#	Question	Answer
1	What is the full form of NISM?	National Institute of Securities Markets
2	Who regulates the securities market in India?	SEBI
3	Define “Securities” as per the SEBI Act.	Any document that evidences ownership of wealth (shares, bonds, mutual funds, etc.)
4	What are the primary functions of a Stock Exchange?	Trading, clearing, settlement, price discovery, and regulatory compliance
5	Explain the difference between primary and secondary markets.	Primary – new securities issuance; Secondary – trading of existing securities
6	What is a Depository Participant (DP)?	An agent of a depository that provides services to investors for holding and transacting securities electronically
7	Name the two depositories operating in India.	CDSL and NSDL
8	What is the role of the Clearing Corporation of India Ltd (CCIL)?	Provides clearing, settlement, and risk management services for OTC derivatives and other securities
9	Define “Basket Order”.	An order to buy/sell multiple securities in a single instruction
10	What is the purpose of the “Stop‑Loss” order?	Limits investor’s loss by automatically selling when a price falls below a set level
11	Explain “Margin Trading Facility (MTF)”.	Allows investors to buy securities by paying only a fraction of the total cost, borrowing the rest from the broker
12	What is “Short Selling”?	Selling borrowed securities expecting price decline, buying back later to return them
13	Identify the key components of a Broker‑Client Agreement.	Services, fees, responsibilities, compliance, termination, dispute resolution
14	What is “Know Your Customer (KYC)” and why is it mandatory?	Customer identification process to prevent fraud and comply with regulatory norms
15	List the documents required for KYC.	Proof of identity (PAN, Aadhaar, passport), proof of address, photograph
16	What is the “Client Code” and how is it generated?	Unique identifier for a client in the broker’s system; generated during onboarding after KYC
17	Define “Settlement Cycle”.	Period between trade execution and final settlement of dues
18	What is the current T+2 settlement cycle in India?	Trade day (T) + 2 business days
19	Explain “Rolling Settlement”.	All trades settled on a fixed rolling basis (T+2) rather than individual dates
20	What is “Corporate Action”?	Events like dividends, bonus issues, rights issues, splits, mergers affecting securities
21	How does a “Rights Issue” differ from a “Bonus Issue”?	Rights – fresh shares offered to existing shareholders at a price; Bonus – free additional shares based on existing holding
22	What is “Ex‑Dividend Date”?	First day the stock trades without the dividend; buyer does not receive the dividend
23	Define “Buy‑Back of Securities”.	Company repurchases its own shares from the market, reducing supply
24	What is the “Depository Receipt”?	A negotiable instrument representing foreign securities held in a depository
25	Explain “Foreign Institutional Investment (FII)”.	Investment by foreign entities in Indian securities, subject to SEBI regulations
26	What is “Foreign Direct Investment (FDI)”?	Investment by a foreign entity acquiring stake >10% in an Indian company
27	Identify the main obligations of a Broker under SEBI regulations.	Fair dealing, safe‑keeping of client securities, timely settlement, compliance reporting
28	What is “Order Routing”?	Process of sending client orders to the appropriate exchange or venue
29	Define “Order Book”.	List of all pending buy/sell orders at a given moment
30	What is “Market‑Making”?	Providing continuous two‑sided quotes to ensure liquidity
31	Explain “Risk Management” in securities operations.	Systems and policies to identify, measure, monitor, and mitigate market, credit, and operational risks
32	What is “Stress Testing”?	Evaluating portfolio performance under extreme market conditions
33	Identify the key elements of a “Trade Confirmation”.	Trade date, quantity, price, settlement date, buyer/seller details, broker reference
34	What is “Trade Matching”?	Process of verifying that buy and sell orders are compatible before settlement
35	Define “Settlement Failure”.	When a party fails to deliver securities or funds on the settlement date
36	What are the consequences of settlement failure?	Penalties, margin calls, reputational damage, possible legal action
37	Explain “Margin Call”.	Notice to investor to deposit additional funds when margin balance falls below required level
38	What is “Initial Margin”?	Margin required before a trade is executed to cover potential losses
39	Define “Variation Margin”.	Additional margin posted during the life of a position to cover price movements
40	What is “Position Limit”?	Maximum number of contracts/securities an entity can hold
41	Explain “Liquidity Risk”.	Risk of not being able to buy/sell securities quickly without affecting price
42	What is “Operational Risk”?	Risk arising from internal processes, people, systems, or external events
43	Identify the role of “Investor Education and Protection Fund (IEPF)**.	Promotes investor awareness, handles unclaimed securities, and protects investor interests
44	What is “Unclaimed Dividend”?	Dividend not claimed by shareholders; transferred to IEPF after a stipulated period
45	Define “Scrip‑less Trading”.**	Electronic trading without physical share certificates
46	What is “Electronic Settlement System (ESS)”?	Computerised system for settling trades electronically
47	Explain “Trade Audit Trail”.	Record keeping that allows reconstruction of trade details for compliance and investigation
48	What is “Regulatory Reporting” and which bodies receive it?	Reporting to SEBI, RBI, and stock exchanges on large trades, insider dealings, etc.
49	Identify the importance of “Data Privacy” in securities operations.	Protects client information, ensures compliance with IT Act, and maintains trust
50	What are the major challenges faced by brokers in today’s market?	Technology integration, regulatory changes, cyber‑security threats, client education, and competition

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Frequently Asked Questions (FAQ)

Q1: How many times should I revise the NISM Series VII material?

A: Aim for 3–4 complete revisions – one initial read, two practice‑oriented reviews, and a final “speed‑read” before the exam.

Q2: Is memorization essential for this exam?

A: While concepts are important, understanding the underlying principles helps you answer scenario‑based questions accurately.

Q3: Can I use calculators during the exam?

A: No. The NISM Series VII exam is offline and no calculators are permitted.

Q4: How do I keep track of the latest regulatory changes?

A: Follow SEBI alerts, subscribe to reputable finance newsletters, and regularly check the NISM website for updated syllabi.

Q5: What is the best way to practice the questions?

A: Timed mock tests simulate exam pressure and help improve speed and accuracy.

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Practical Tips for Exam Success

• Create a Topic‑Wise Mind Map – Visualize connections between concepts (e.g., corporate actions → settlement → payouts).
• Use the “Query‑Answer” Method – For each question, write a short “why” and “how” explanation to reinforce understanding.
• Maintain a Formula/Regulation Sheet – Quick reference for SEBI rules, margin calculations, and corporate action formulas.
• Practice with Real‑World Scenarios – Simulate trades, settlement failures, and margin calls to apply theory.
• Stay Updated – Regulatory changes (e.g., T+5 to T+2 settlement) can appear in exam questions.
• Join Study Groups – Discussing tough topics clarifies doubts and exposes you to diverse problem‑solving approaches.
• Mock Test Strategy – Allocate time per question (≈1 minute), skip difficult ones initially, and revisit later.

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