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Difficulty: EasyDepositories, Clearing Corporations, and Settlement Entities

Which entity serves as the central counterparty for clearing corporate equity trades executed on U.S. stock exchanges, guaranteeing trade completion between buying and selling member firms?

  1. National Securities Clearing Corporation (NSCC)Answer
  2. B
    Depository Trust Company (DTC)
  3. C
    Options Clearing Corporation (OCC)
  4. D
    Financial Industry Regulatory Authority (FINRA)

Answer

National Securities Clearing Corporation (NSCC)
The National Securities Clearing Corporation (NSCC), a subsidiary of the Depository Trust & Clearing Corporation (DTCC), serves as the central counterparty for clearing corporate equity transactions, netting trades and guaranteeing completion between clearing members.

Step-by-Step Solution

1
Identify the primary operational function requested
The scenario requires identifying the entity responsible for central counterparty trade clearance and guarantee for corporate stock trades.
Differentiating clearing responsibilities from custody and regulatory functions.
2
Match the entity to the clearing role
The National Securities Clearing Corporation (NSCC) clears exchange-traded equities and acts as the central counterparty for settlement.
NSCC guarantees trade completion and nets obligations between clearing members.

Key Concept

Clearing Corporations vs. Securities Depositories
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Topics

Depositories, Clearing Corporations, and Settlement Entities

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