Currency Derivatives Certification Examination
Introduction to Currency Markets
- History of foreign exchange markets
- Major currency pairs
- Overview of international currency markets
- Basics and Peculiarities of currency markets in India
- Settlement or value date
- Over-the-Counter (OTC) forward market
- Exchange rate arithmetic- cross rate
- Impact of market economics on currency prices
- Economic indicators
Foreign Exchange Derivatives
- Evolution of derivatives
- Derivative products and features
- Growth drivers of derivatives
- Market players in the foreign exchange market
- Key economic functions of derivatives
- Exchange-Traded Vs. OTC derivatives
Exchange Traded Currency Futures
- Currency futures
- Spot price
- Futures price
- Contract cycle
- Value date/Final settlement date
- Expiry date
- Contract size
- Initial margin
- Marking-to-market
- Rationale behind currency futures
- Standard items in a futures contract
- Introduction of currency futures in India
- Futures and forward contracts
- Advantages of futures contracts
- Limitations of futures contracts
- Interest rate parity and pricing of currency futures
Strategies Using Currency Futures
- Role of speculation in futures markets
- Long position in futures
- Short position in futures
- Hedging using currency futures
- Types of hedgers
- Size of the hedging position
- Trading spreads using currency futures
- Concept of arbitrage
- Use of arbitrage in currency futures markets
- Arbitrage opportunities under various conditions
Trading in Currency Futures
- Contract specification for currency futures
- Trading parameters
- Tenors of futures contract
- Settlement price
- Entities in the trading system
- Types of orders
- Concept of Mark-to-Market (MTM)
- Position limits
- Allowable open position limits for members trading in currency futures
- Monitoring and enforcement of position limits in the currency futures market
- Surveillance systems and procedures of exchanges
Clearing, Settlement and Risk Management in Currency Futures
- Clearing entities
- Clearing mechanism
- Open positions and obligations of clearing members
- Settlement mechanism
- MTM settlement
- Final settlement
- Risk management measures
- Concept of margin requirements
- Initial margin
- Portfolio based margin
- Calendar spread margin
- Extreme loss margin
- Liquid net worth
- Liquid assets
- Real time computation
- Process of margin collection by Clearing Corporations
Exchange Traded Currency Options
- Options
- Call and put option
- Bought and sold option
- Option premium
- Futures and options
- European vs. American option
- Moneyness of an option
- Option pricing and option Greeks
- Option pricing methodology
- Black-Scholes model
- Binomial pricing model
- Option pay offs
- Option strategies
- Practical application of currency options
- Clearing, settlement and risk management for currency options
- Initial margin
- Extreme loss margin
- Net option value
- Calendar margin
Accounting and Taxation
- Accounting treatment for derivative contracts
- Taxation of derivative transaction in securities
- Tax treatment of profit/loss on derivative transaction in securities
Regulatory Framework for Currency Derivatives
- Features of Securities Contracts (Regulation) Act, 1956 [SC(R)A]
- Features of Securities and Exchange Board of India Act, 1992
- Recommendations of the RBI-SEBI Standing Technical Committee on Exchange Traded Currency and Interest Rate Derivatives
- Provisions of Foreign Exchange Management Act, 1999
- Salient features of RBI notification ‘Currency Futures (Reserve Bank) Directions, 2008
- Salient features of RBI Circular, ‘Guidelines on trading of Currency Futures in Recognised Stock / New Exchanges’
- Salient features of SEBI Regulations for Currency Derivatives Exchanges
- Regulatory framework for clearing corporations
- Governing Council of the Exchange and Clearing Corporation
- Eligibility criteria for membership of currency derivatives exchanges
Codes of Conduct and Investor Protection Measures
- Features of SEBI Codes of Conduct for brokers
- Features of SEBI Codes of Conduct for sub-Brokers
- Features of Codes of Conduct specific to Exchange Traded Currency Derivatives Segment
- Grievance redressal mechanism for investors
- Nature of complaints considered by exchanges
- Arbitration mechanism at exchanges
- Fees (Rs.) – 1500+
- Test Duration(in minutes) – 120
- No. of Questions – 100
- Maximum Marks – 100
- Pass Marks*(%) – 60
- Certificate Validity(in years) – 3
