How Stock exchanges ensure the traders counter party risk?

[Praveen Kumar Ramachandran]

<span style=”color: #777777; font-family: ‘Roboto Slab’; font-size: 13px;”>Through caution deposit depends on the stock value.</span>

[Loyd Dsouza]

with the help of caution deposit from traders through broker.

[PRATEEK GUPTA]

All the traders are connected to the exchange only through the certified brokers. And it is the brokers responsibility to check that the orders are placed with proper deposits in the traders account. Exchange will take from the brokers deposit if there is any discrepancy to solve the settlement with the counter party.

For futures a caution deposit is mandatory.

For option trading, premium is required to pay upfront.

[Parthasarathy J]

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All the traders are connected to exchange only through certified brokers.  And it is brokers responsibility to check that the orders are placed with proper depts in traders’s account.  Exchange will take from brokers deposit if any misplaced orders from their client, to solve the settlement with counter party.

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[Anitha Ramesh]

The  brokers play an important role in counter party risk.

It is the reponsibility of  exchange to take care of counter party risk via brokers.

The brokers have to ensure that his client has required amount in his account.

And also properly execute short covering.If it fails to do so, the broker will be deducted with the amount and penalty(which was earlier deposited by brokers as caution deposit with the exchange.)

In futures,trader’s order will be executed only with caution deposit.

In options,premium will be collected prior to the order execution.

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