Module: | MODULE A: INTERNATIONAL BANKING
Q230: Consider the following statements regarding the capital market infrastructure established within the smart city:
Statement 1: Recognized Clearing Corporations operating in the centre act as the central counterparty for all executed trades, legally guaranteeing the financial settlement of every transaction.
Statement 2: To meticulously maintain the offshore character of the zone, the final financial settlement of all derivative and equity trades executed on these exchanges must be completed exclusively in freely convertible foreign currencies.
Statement 2: To meticulously maintain the offshore character of the zone, the final financial settlement of all derivative and equity trades executed on these exchanges must be completed exclusively in freely convertible foreign currencies.
✅ Correct Answer: C
Robust market infrastructure is essential to attract sophisticated global traders.
Statement 1 is correct.
Clearing Corporations act as the vital central nervous system of the stock exchange.
By legally becoming the buyer to every single seller and the seller to every single buyer, they provide a process called novation.
This mathematically guarantees the settlement of all trades, thereby eliminating counterparty credit risk for the market participants.
Statement 2 is also correct.
Because the entire financial centre operates as a non-resident zone under strict foreign exchange laws, the use of domestic currency is strictly prohibited for core market transactions.
Therefore, the pricing, clearing, and final cash settlement of all listed securities and derivatives must take place strictly in approved freely convertible foreign currencies, most commonly the United States Dollar.
Statement 1 is correct.
Clearing Corporations act as the vital central nervous system of the stock exchange.
By legally becoming the buyer to every single seller and the seller to every single buyer, they provide a process called novation.
This mathematically guarantees the settlement of all trades, thereby eliminating counterparty credit risk for the market participants.
Statement 2 is also correct.
Because the entire financial centre operates as a non-resident zone under strict foreign exchange laws, the use of domestic currency is strictly prohibited for core market transactions.
Therefore, the pricing, clearing, and final cash settlement of all listed securities and derivatives must take place strictly in approved freely convertible foreign currencies, most commonly the United States Dollar.