Trading, Accounts & Prohibited ActsQuestion 235 of 398
What is the main benefit of the multilateral netting performed by a central clearing corporation such as the NSCC?
a.It reduces the number and value of securities and payments that must actually be exchanged
b.It eliminates the need for any settlement of trades
c.It guarantees that every stock will rise in value
d.It replaces the role of the SEC as a regulator
Explanation
Multilateral netting offsets each member's many buy and sell obligations against one another so that only the net amounts of securities and cash change hands. This dramatically reduces settlement volume, cost, and counterparty risk across the market.
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