Introduction to Financial Markets (405) — CBSE Class 10 board question

Definition of Clearing Corporation:
A Clearing Corporation is a part of an exchange or a separate entity that clears and settles all transactions, i.e., completes the process of receiving and delivering shares/funds to buyers and sellers in the market.

Role of Clearing Corporation:

1. Clears and Settles Transactions: It completes the process of receiving and delivering shares/funds to the buyers and sellers in the market.
2. Financial Guarantee: It provides financial guarantee for all transactions executed on the exchange.
3. Risk Management: It provides risk management functions to ensure smooth functioning of the market.

(Example: NSCCL, a 100% subsidiary of NSE, performs the role of Clearing Corporation for transactions executed on NSE.)

Source: Chapter 8, Section 8.3 – Clearing & Settlement and Redressal

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• The question has two parts — definition (1 mark) and role (3 marks) — so allocate more lines to the three roles.
• The three roles are directly lifted from the source: clearing & settlement, financial guarantee, and risk management. Examiners expect all three.
• Mentioning NSCCL as an example adds context and shows understanding but is optional.
• Avoid writing lengthy paragraphs; crisp numbered points score better in board exams.