How Stock exchanges ensure the traders counter party risk?

[SRINIDHI NARAYANAN]

In order to invest in shares , traders contact through brokers who act as a mediator between investors and exchange .

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.
Thus the broker is held responsible for the acts of the party and made to bear the risks .

[Padmanabha]

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.

[Gangadharan K]

Counter party risks are ensured with the help of Stock Brokers who acts as an intermediate between Exchange Board and the Trader.

[KAVITHA SUNDER]

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.

[Neha Narayanan]

Brokers act as the intermediaries between exchange and traders.Exchange requires the broker to deposit some money with the exchange for providing broker’s license. If any trader defaults his transaction, then the exchange uses the broker’s money to settle the counter party and the broker has to recover this from his trader.

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