Canadian Securities Course (CSC) Practice Exam

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Practice for the Canadian Securities Course (CSC) exam with our quiz. Test your knowledge with multiple-choice questions. Be prepared for the real exam!

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What is the primary function of a clearinghouse in exchange-traded derivatives?

Administer stock options
Guarantee gains only
Act as a 3rd party guarantor
Facilitate direct trading

The correct answer is: Act as a 3rd party guarantor

A clearinghouse in exchange-traded derivatives acts as a neutral third party guarantor. This means that they act as an intermediary between the buyer and seller, ensuring that both parties fulfill their obligations. They do not administer stock options (choice A) nor do they guarantee gains only (choice B). While a clearinghouse does facilitate trading, this is not its primary function (choice D). The main function of a clearinghouse is to reduce the risk of default in exchange-traded derivatives by providing a clearing and settlement process.