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Stock exchanges ensure the counter party risk by keeping a caution deposit from the broker.
Caution Deposit, through brokers!
When a Seller doesn’t have the number of shares he quoted for the bid, at the end of the day the stock exchange has a seperate counter to buy it and settle the buyer.
In case if the buyer doesn’t pay cash, stock exchange gets hold of the broker to release the payment, broker in turn comes to the buyer. if buyer is not paying broker has to pay.
From Caution Deposit of Broker.
Stock exchanges authorize Brokers to ensure trading. Brokers are responsible for their Clients. If any money has to be recovered or any shares has to be purchased or sold by the clients Brokers should ensure it. Thus risk is countered.
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