SCA Clearing, Settlement and Custody

Question 1

What is the standard settlement cycle for equity securities traded on SCA-regulated UAE financial markets?

Accepted Answer

T+2 (two business days after trade date)

Answer

T+1 (next business day)

Answer

T+3 (three business days after trade date)

Answer

Same-day settlement (T+0)

Question 2

What is the primary purpose of a Central Counterparty (CCP) in UAE securities markets?

Accepted Answer

To interpose itself between buyer and seller, becoming the legal counterparty to both and eliminating bilateral counterparty risk

Answer

To provide investment advice to institutional investors

Answer

To set daily price limits for listed securities

Answer

To issue new securities on behalf of listed companies

Question 3

What does 'Delivery versus Payment' (DvP) mean in the context of securities settlement?

Accepted Answer

Securities are transferred and cash is paid simultaneously, eliminating principal risk

Answer

The buyer pays before receiving securities as a security measure

Answer

Payment is made after securities are independently verified by a third party

Answer

Securities are delivered without any payment requirement for approved counterparties

Question 4

What is the primary function of a Central Securities Depository (CSD) in UAE capital markets?

Accepted Answer

To maintain the central register of securities ownership and facilitate settlement through book-entry transfers

Answer

To provide margin loans to investors for purchasing securities

Answer

To set interest rates for government bond issuances

Answer

To regulate the conduct of licensed broker-dealers

Question 5

In UAE securities markets, which of the following best describes a 'settlement fail'?

Accepted Answer

A situation where a party fails to deliver securities or funds on the agreed settlement date

Answer

A trade that is cancelled before reaching the exchange matching engine

Answer

A regulatory penalty imposed for late trade reporting to SCA

Answer

An error detected in the trade confirmation message between counterparties

Question 6

What is the primary role of a custodian bank in UAE securities markets?

Accepted Answer

To safeguard clients' securities and cash, process corporate actions, and facilitate settlement

Answer

To execute securities trades on behalf of investors on the exchange

Answer

To provide credit ratings for securities issuers listed on DFM or ADX

Answer

To determine the daily settlement prices of listed securities

Question 7

What does 'dematerialization' of securities mean in the context of UAE capital markets?

Accepted Answer

The conversion of physical share certificates into electronic book-entry records held at a CSD

Answer

The cancellation of securities following a company's voluntary liquidation

Answer

The transfer of securities ownership from a domestic investor to a foreign investor

Answer

The destruction of old paper certificates when a company performs a stock split