SCA Clearing, Settlement and Custody 1

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

UAE equity markets follow a T+2 settlement cycle, meaning transactions settle two business days after the trade execution date.

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

A CCP becomes the buyer to every seller and the seller to every buyer, guaranteeing trade settlement and eliminating bilateral counterparty risk from the market.

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

DvP ensures the irrevocable transfer of securities occurs simultaneously with the irrevocable transfer of funds, eliminating the risk that one party delivers without receiving the corresponding value.

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

A CSD maintains the official central register of securities ownership and enables settlement by recording transfers between accounts electronically without movement of physical certificates.

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 settlement fail occurs when either the seller fails to deliver the securities or the buyer fails to provide the required funds by the scheduled settlement date.

SCA Practice Test

SCA Practice Test

SCA Clearing, Settlement and Custody 1