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NISM Currency Derivatives

NCFM DERIVATIVES MARKET

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NCFM Capital Market

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Acronym

NCFM - National Stock Exchange Certification in Financial Markets
BCFM - Bombay Stock Exchange Certification in Financial Markets
NISM - National Institute of Securities Markets

NISM – National Institute of Securities Markets

National Institute of Securities Markets (NISM) is a public trust, established by the Securities and Exchange Board of India (SEBI), the regulator for securities markets in India.

NISM consists of six different schools as follows:

School for Investor Education and Financial Literacy (SIEFL)
School for Certification of Intermediaries (SCI)
School for Securities Information and Research (SSIR)
School for Regulatory Studies and Supervision (SRSS)
School for Corporate Governance (SCG)
School for Securities Education (SSE)

School for Certification of Intermediaries (SCI)

The School for Certification of Intermediaries (SCI) at NISM is engaged in developing certification examinations for professionals employed in various segments of the Indian securities markets. These examinations are being developed by NISM as mandated under SEBI (Certification of Associated Persons in the Securities Markets) Regulation, 2007.

NISM-Series-I: Currency Derivatives Certification Examination

Who should take this exam?

Persons working in the Currency Derivatives market segment
Employees of Stock Brokers and Sub-Brokers
Students, Teachers, Investors
Anybody having interest in the Currency Derivatives Market

Examination objectives

Mandatory for Persons working in the Currency Derivatives market segment
To know the basics of currency markets especially Exchange Traded Currency Futures markets.
To understand the trading, clearing and settlement mechanisms related to Currency Futures markets and basic investment strategies that use currency futures products.
To know the regulatory environment of Currency Futures markets in India.

NISM Currency Derivatives Examination Assessment Structure
DURATION	120 Minutes
NO. OF QUESTIONS	100
MAXIMUM MARKS	100
PASS MARK	60
NEGATIVE MARK	25% FOR WRONG ANSWERS
CERTIFICATE VALIDITY	3 YEARS
EXAM FEES	Rs 1250/- (w.e.f 28th Jan 2013)

New Syllabus Outline for NISM Currency Derivatives Certification Exam (Feb 2012 onwards)

Unit 1 Introduction to Currency Markets

1.1 Basic Foreign Exchange Definitions

1.2 Exchange Rate Mechanism

1.3 Major Currencies of the World

1.4 Overview of International Currency Markets

1.5 Economic Variables Impacting Exchange Rate Movements

Unit 2 Foreign Exchange Derivatives

2.1 Derivatives - Definition

2.2 Derivative Products

2.3 Growth Drivers of Derivatives

2.4 Market Players

2.5 Key Economic Function of Derivatives

2.6 Exchange-Traded Vs. Over –the- Counter Derivatives

Unit 3 Exchange Traded Currency Futures

3.1 Currency Futures -Definition

3.2 Futures Terminology

3.3 Rationale behind Currency Futures

3.4 Distinction between Futures and Forward Contracts

3.5 Interest Rate Parity and Pricing of Currency Futures

Unit 4 Strategies Using Currency Futures

4.1 Speculation in Futures Markets

4.2 Long Position in Futures

4.3 Short Position in Futures

4.4 Hedging Using Currency Futures

4.5 Trading Spreads Using Currency Futures

4.6 Arbitrage

Unit 5 Trading in Currency Futures

5.1 Currency Futures Contract Specification

5.2 Trading Parameters

5.3 Tenors of Futures Contract

5.4 Trader Workstation Screen (TWS)

5.5 Entities in the Trading System

5.6 Types of Orders

5.7 Mark-to-Market

5.8 Position Limits

Unit 6 Clearing, Settlement and Risk Management in Currency Futures

6.1 Clearing Entities

6.2 Clearing Mechanism

6.3 Settlement Mechanism

6.4 Risk Management Measures

6.5 Margin Requirements

Unit 7 Exchange Traded Currency Options

7.1 Options – Definition, basic terms

7.2 Difference between futures and options

7.3 Options in financial market

7.4 Style of options

7.5 Moneyness of an option

7.6 Basics of option pricing and option Greeks:

7.7 Option pricing methodology

7.8 Option pay offs

7.9 Option strategies

7.10 Uses of currency options

7.11 Clearing, Settlement and Risk Management for currency options

Unit 8 Accounting And Taxation

8.1 Accounting

8.2 Taxation of Derivative Transaction in Securities

Unit 9 Regulatory Framework for Currency Derivatives

9.1 Securities Contracts (Regulation) Act, 1956 [SC(R)A]

9.2 Securities and Exchange Board of India Act, 1992

9.3 RBI-SEBI Standing Technical Committee on Exchange Traded Currency and Interest Rate Derivatives

9.4 Foreign Exchange Management Act, 1999 - Provisions

9.5 Regulatory Framework for Exchanges

9.6 Regulatory Framework for Clearing Corporations

9.7 Governing Council of the Exchange and Clearing Corporation

9.8 Eligibility Criteria for Members

Unit 10 Codes of Conduct and Investor Protection Measures

10.1 Adherence to SEBI Codes of Conduct for Brokers / Sub Brokers

10.2 Adherence to Codes of Conduct Specific to ETCF Segment

10.3 Grievance Redressal Mechanism for Investors

NISM-Series-V-A: Mutual Fund Distributors Certification Examination

The certification aims to enhance the quality of sales, distribution and related support services in the mutual fund industry.

Who should take this exam?

Individual / Corporate Mutual Fund Distributors, Any one who is into selling of mutual funds including IFA
Anyone who interacts with mutual fund investors, including investor relations teams and employees of call centres
Employees of organizations engaged in sales and distribution of Mutual Funds including Banks, National Mutual Fund Distributors etc.
Employees of Asset Management Companies especially persons engaged in sales and distribution of Mutual Funds.
Employees of Stock Brokers and Sub-Brokers who are into selling of Mutual Funds
Students, Teachers, Investors
Anybody having interest in the Mutual Fund Industry

Examination objectives

• To know the basics of mutual funds, their role and structure, different kinds of mutual fund schemes and their features
• To understand how schemes are to be evaluated, and how suitable products and services can be recommended to investors and prospective investors in the market.
• To get oriented to the legalities, accounting, valuation & taxation aspects of mutual funds.
• To get acquainted with financial planning as an approach to investing in mutual funds

.NISM MUTUAL FUND EXAM Assessment Structure:

DURATION	120 Minutes
NO. OF QUESTIONS	100
MAXIMUM MARKS	100
PASS MARK	50
NEGATIVE MARK	25% FOR WRONG ANSWERS
CERTIFICATE VALIDITY	3 YEARS
EXAM FEES	Rs 1250/- (w.e.f 28th Jan 2013)

NISM MUTUAL FUND EXAM Syllabus Outline

Unit 1: Concept and Role of a Mutual Fund

Describe concept and advantages of a mutual fund

Define a mutual fund and list the functions of a mutual fund

Investment objectives and the concept of marking to market

Unit capital, Assets Under Management, fund running expenses

List the advantages and limitations of a mutual fund

Describe, in brief, the history of mutual funds in India

Understand and differentiate between various types of funds

Explain the features and types of debt funds

Explain the features and types of equity funds

Explain the features and types of hybrid funds

Explain the features and types of International funds

Unit 2: Fund Structure and Constituents

Understand the legal structure of mutual funds in India

Describe the structure of mutual funds in India

The role of the Sponsor, Trustee and Asset Management Company (AMC)

Regulatory provisions with respect to Sponsor, Trustee and AMC

Fund Constituents and regulatory provisions

Functions of each mutual fund constituent

Unit 3: Legal and Regulatory Environment

Define the role of SEBI in regulating mutual funds

SRO and its role

List the functions of AMFI

Understand the AMFI Code of Ethics

Investment restrictions and related regulation

The relationship between investment policy and investment objective

SEBI norms on portfolio diversification pertaining to investment management

Understand Investors rights and obligations

Service standards mandated for a mutual fund towards its investors

Unit 4: Offer Document

Understand regulatory aspects of an offer document

Define an NFO and list the marketing steps involved in an NFO

Define the role of an offer document and the objectives of information disclosure in an offer document, KIM (Key Information memorandum)

Statement of Additional Information (SAI) & Scheme Information Document (SID)

Format of the SID and SAI

Unit 5: Fund Distribution and Sales Practices

List investors who can invest and those that cannot invest in mutual funds in India

Eligibility of investors to invest in a scheme of a mutual fund

Differentiate between institutional and individual investors

Describe various distribution channels for mutual funds

Describe the pre-requisites to be fulfilled to become a distributor of a mutual fund

Agreement between a distributor and a mutual fund

Payment of Commissions between the distributor and the mutual fund

Regulatory aspects governing payment of commissions to distributors

Classify commissions into initial or upfront and trail commissions

Define the basis of charging trail commissions

AMFI Code of Conduct and SEBI guidelines governing sales practices

Unit 6: Accounting, Valuation and Taxation

Compute net assets and NAV

Explain the factors affecting the NAV of a mutual fund scheme

Explain the time-stamping requirement for mutual fund transactions

Requirements relating to charging of expenses to a mutual fund scheme

Expenses that can be charged to a scheme and those that cannot be charged

Expense limits, Key accounting & reporting requirements

Explain the tax provisions applicable to a mutual fund

Define the tax provisions applicable to distribution of dividend by a mutual fund

Taxability of dividends and capital gains in the hands of a mutual fund investor

Securities Transactions Tax based on type of transaction and scheme

Basics of setting off gains and losses under Income Tax Act

Unit 7: Investor Services

Purchase and redemption transactions in a mutual fund

Explain KYC requirements & Demat Account concept

Explain the process for fresh and additional purchase in a mutual fund

Documentation requirements applicable to institutional investors.

Payment instruments accompanying an application form

Explain the processes relating to redemptions by investors

Contents and periodicity of Statement of Account (SoA) to the investor

Explain the process for nomination and pledge

Investment plans and services – Dividend, Growth and Reinvestment Plans.

SIP, SWP, STP

Describe other investor services and facilities offered by mutual funds.

Unit 8: Risk, return and performance of funds

Understand the concept of return on investment

Simple, annualized and compounded returns. (Including MS Excel Functions)

Outline the SEBI norms regarding return representation of mutual funds in India

Identify and define the factors that may affect mutual fund performance

Explain risks in fund investing with a focus on investors

Evaluate the risks in different type of mutual funds

Identify the sources of risk in an equity fund

Identify the sources of risk in a debt fund

Classify mutual funds based on their risk

Explain the concept of benchmarking performance

Identify the basis of choosing an appropriate performance benchmark

Describe the use of market benchmarks to evaluate equity fund performance

Describe the use of market benchmarks to evaluate debt fund performance

Describe benchmarking relative to other investment products

Explain the concepts related to fund manager performance

Unit 9: Scheme Selection

Steps in selecting equity funds

Steps in selecting debt funds

Steps in evaluating a money market fund

Evaluating balanced mutual funds and factors impacting their performance

Identify the sources of data to track mutual fund performance

Unit 10: Selecting the Right Investment Products for Investors

Classify assets into physical and financial assets

Features of physical assets such as gold and real estate.

Financial assets available for investment by an investor and their key features

Unit 11: Helping Investors with Financial Planning

Understand basics of financial planning

Define financial planning

Explain the objective of financial planning

List the benefits and identify the need for financial planning to the investor

Define and describe life cycle and wealth cycle in financial planning

Explain the need for tools to categorize investors’ needs

Link the financial planning needs to the life cycle stage of the investor

Describe the stages in the wealth cycle model of investor

Identify the features of each stage and link them to investment needs

Unit 12: Recommending Model Portfolios and Financial Plans

Define and describe risk profiling

Understand asset allocation

Why asset allocation is done

Fixed & Flexible Asset Allocation

Strategic & Tactical Asset Allocation

Describe the steps in developing a model portfolio

NCFM CAPITAL MARKET DEALERS MODULE

Why should one take this course?

To understand the capital market trading operations of NSE.
To understand the clearing, settlement and risk management processes.
To know about the eligibility criteria for seeking membership at NSE.
To learn the other important regulatory aspects.
NCFM CMDM Certification is mandatory for Users / Dealers of Capital Market Segment of Stock Brokers.

Who will benefit from this course?

Employees of Stock Brokers and Sub-Brokers
Students
Teachers
Employees of BPO/IT Companies
Investors
Anybody having interest in the Stock market operations

Test details

DURATION	105 MINUTES
NO. OF QUESTIONS	60
MAXIMUM MARKS	100
PASS MARK	50
NEGATIVE MARK	25% FOR WRONG ANSWERS
CERTIFICATE VALIDITY	5 YEARS
EXAM FEES	Rs 1500/-

Syllabus Outline

An Overview of the Indian Securities Market

Primary Market, Secondary Market, Derivatives Market
Market segments, Key indicators of securities market, Products and participants, Reforms in Indian securities markets

Trading Membership - Stock brokers, NSE membership, Surrender of trading membership, Suspension & expulsion of membership, Declaration of defaulter, Authorised persons, Sub-brokers, Broker-clients relations, Sub-broker-clients relations, Investor service cell and arbitration, Code of advertisement
Trading Software

Introduction to Neat System
Market Types – Normal Market, Odd Lot Market, Retail Debt Market, Auction Market
Corporate Hierarchy
Local Database
Market Phases - Opening, Open Phase, Market Close, Surcon
Logging on, Log Off/Exit from the Application
Neat Screen
Invoking An Inquiry Screen - Market Watch, Security Descriptor, Market by Price, Previous Trades, Outstanding Orders, Activity Log, Order Status, Snap Quote, Market Movement, Market Inquiry, Auction Inquiry, Security/Portfolio List, Multiple Index Broadcast and Graph, Online Backup, Basket trading, Buy Back Trades, Supplementary Functions
Order Management - Entering Orders, Order Modification, Order Cancellation, Order Matching
Trade Management – Trade Modification, Trade Cancellation
Auction - Entering Auction Orders, Auction Order Modification, Auction Order Cancellation, Auction Order Matching
Limited Physical Market, Retail Debt Market (RDM)
Trading Information Downloaded to Members
Internet Broking
Wireless Application Protocol
CTCL – Computer to Computer Link Facility

Clearing and Settlement

Transaction Cycle, Settlement Process, Settlement Agencies, Risks in Settlement
Settlement Cycle
Securities Settlement, Funds Settlement, Shortages Handling
Risk Containment Measures - Capital Adequacy Requirements, Margins, Settlement Guarantee, No-Delivery Period
International Securities Identification Number
Dematerialisation And Electronic Transfer of Securities
Investor Protection Fund
Clearing Software – Reports

Legal Framework

Securities Contracts (Regulation) Act, 1956
Securities and Exchange Board of India Act, 1992
SEBI (intermediaries) regulations, 2008
SEBI (Insider Trading) Regulations, 1992
SEBI (Prohibition of Fraudulent And Unfair Trade Practices Relating to Securities Markets) Regulations, 2003
The Depositories Act, 1996
Indian Contract Act, 1872
The Companies Act, 1956
Income Tax Act, 1961

Fundamental Valuation Concepts - Time value of money - Time Value of Money – Future Value of a Single Cash Flow, Future Value of an Annuity, Present Value of a Single Cash Flow, Present Value of an Annuity. Understanding financial statements - Understanding Financial Statements -Comparative Financial Statements, Common Size Statements and Ratio Analysis.

NCFM – DERIVATIVES MARKET DEALERS MODULE