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One can trade only through the brokers & not directly. So the brokers act as the cushion / shock absorbers in the trade. In case of any issue arises in the settlement, the broker is the one answerable to the exchange & exchange already has the deposit money from the broker which can be used by the exchange for the settlement.
stock exchanges ensures the traders counter party risk through brokers.
Brokers gets the license to trade only after depositing specified amount to stock exchange.
When the trade is executed and during settlement if any of the party that is the buyer or seller fails to fulfill his promise then the stock exchange will settle the affected person in turn will take money from the brokers deposit.
Stock exchange ensures the counter part risk by brokers. Brokers acts as a cushion between traders and exchange.
All the risks should be taken care by the brokers.
Trading orders are executed only through brokers. Brokers have already provided deposit to the exchange. So in case of any risk, there is no delay in settlement with exchange, as the funds already deposited by broker will be utilized. In that case , broker has to do the settlement with trader on his own.
Stock exchanges ensures the traders counter party risk through brokers.
Brokers gets the license to trade only after depositing specified amount to stock exchange. When the trade is executed and during settlement if any of the party (either buyer or seller) fails to fulfill his promise then the stock exchange will settle the affected person and will take money from the brokers deposit.
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