Page 149 - DCOM510_FINANCIAL_DERIVATIVES

Financial Derivatives

Notes 9.2.1 Client Broker Relationship in Derivative Segment
A trading member must ensure compliance particularly with relation to the following while
dealing with clients:
 Filling of ‘Know Your Client’ form
 Execution of Client Broker agreement
 Bring risk factors to the knowledge of client by getting acknowledgement of client on risk
disclosure document

 Timely execution of orders as per the instruction of clients in respective client codes
 Collection of adequate margins from the client
 Maintaining separate client bank account for the segregation of client money
 Timely issue of contract notes as per the prescribed format to the client
 Ensuring timely pay-in and pay-out of funds to and from the clients
 Resolving complaint of clients if any at the earliest
 Avoiding receipt and payment of cash and deal only through account payee cheques
 Sending the periodical statement of accounts to clients

 Not charging excess brokerage
 Maintaining unique client code as per the regulations

Self Assessment
State whether the following statements are true or false:
8. Corporate hierarchy comprises corporate manager, branch manager, dealer and admin.
9. Dealer is a term assigned to a user who is placed under the corporate manager.
10. Branch manager does not have access to information on other dealers under either the
same branch or other branches.
11. Clearing member corporate manager can view outstanding orders, previous trades and
net position of his client.
12. A trading member must ensure compliance particularly with relation to filling of ‘Know
Your Client’ form.
13. A trading member must ensure compliance particularly with relation to not charging
excess brokerage.

9.3 Order Types and Conditions

The system allows the trading members to enter orders with various conditions attached to
them as per their requirements. These conditions are broadly divided into the following categories:
1. Time conditions:
(a) Day order: A day order, as the name suggests is an order which is valid for the day on
which it is entered. If the order is not executed during the day, the system cancels the
order automatically at the end of the day.
(b) Immediate or Cancel (IOC): An IOC order allows the user to buy or sell a contract as
soon as the order is released into the system, failing which the order is cancelled
from the system. Partial match is possible for the order.

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