Previous Year Question
With reference to India, consider the following statements:
Retail investors through demat account can invest in Treasury Bills and Government of India Debt Bonds in the primary market.
The Negotiated Dealing System-Order Matching is a government securities trading platform of the Reserve Bank of India.
The Central Depository Services Ltd. is jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange.
Which of the statements given above is/are correct?
1 only
1 and 2
3 only
2 and 3
Correct Answer: B
Detailed Solution
Statement 1 is correct.
The RBI permits retail investors to participate in government-security auctions through the Non-Competitive Bidding facility. Under this arrangement, a retail investor does not quote a competitive price or yield like an institutional bidder. Securities are allotted at the weighted-average price or yield emerging from the auction.
Through authorised intermediaries and facilities provided by stock exchanges, retail investors may participate in the primary market for:
Government of India Treasury Bills;
Central Government dated securities; and
State Government securities, subject to eligibility and the available arrangement.
The allotted securities may be held in the investor’s demat account. Subsequently, the RBI Retail Direct arrangement also enabled investors to open a Retail Direct Gilt Account with the RBI and participate in the primary and secondary government-securities markets.
Statement 2 is correct.
The Negotiated Dealing System-Order Matching, or NDS-OM, is an RBI-owned electronic, screen-based and anonymous order-matching system for secondary-market trading in government securities.
Buy and sell orders are matched electronically. Direct members may include banks, Primary Dealers and other eligible regulated institutions. Other eligible investors may obtain indirect access through their banks or the NDS-OM Web arrangement.
The system is anonymous because the identity of the counterparty is not displayed while an order is being placed. Matching primarily follows price and time priority.
Statement 3 is incorrect.
Central Depository Services (India) Limited was promoted under the leadership of the Bombay Stock Exchange together with banks and other financial institutions. The RBI was not its joint promoter.
CDSL is a securities depository. Its principal functions include holding securities in electronic form and facilitating their transfer and settlement. It is regulated by SEBI.