NISM COMMON DERIVATIVES
1. Basics of Derivatives
Introduction to derivatives
History and evolution of derivatives market
Factors influencing the growth of derivatives market
History of Indian derivatives Market and available derivative products in India
Market participants and their roles in the derivatives markets
OTC and Exchange Traded Market
Significance and economic purpose of derivatives
Risks associated with financial derivatives
2. Introduction to the Underlying Markets
Introduction to Equity Markets and Equity Indices
Introduction to Currency Markets
Introduction to Fixed-income Securities
Introduction to “Interest Rate” concept and yield curve
Return and Risk Measures for Debt Securities (Current yield, YTM, Duration, PVBP, Convexity, etc.)
3. Introduction to Forwards and Futures
Introduction to Forwards and futures contracts
Forwards and Futures on Equities
Payoff Charts for Futures contract
Futures pricing
Basic differences in Commodity, Equity and Index Futures
Exchange Traded Currency Futures
Concept of Interest rate parity and pricing of currency futures
Interest Rate Futures
4. Strategies Using Futures
Strategies using Equity Futures
Strategies for hedging, speculation and arbitrage in futures market
Strategies Using Currency Futures
Strategies Using Interest Rate Futures
5. Introduction to Options – Options on Equities and Currencies
Basics of options
Concept of option premium
Call and Put option
Buying and selling (writing) options
European vs. American option
Moneyness of an option
Binomial and Black-Scholes option pricing models and option Greeks
Payoff charts for options
Uses of Options
6. Option Trading Strategies – Strategies using Equity Options and Currency options
Option spreads and their payoff charts
Straddle: market view and payoff charts
Strangle: market view and payoff charts
Covered Call: market view and payoff charts
Protective Put: market view and payoff charts
Collar: market view and payoff charts
Butterfly spread: market view and payoff charts
7. Introduction to Trading, Clearing, Settlement & Risk Management
Introduction to Trading Systems
Clearing Mechanism and computation of open positions
Settlement Mechanism for futures and options contracts
Margining and mark to market (MTM) under SPAN
Risk Management features, position limits and net worth requirements
Margin collection process of Clearing Corporations and delivery procedure
8. Legal and Regulatory Environment
Provisions of Securities Contract (Regulation) Act, 1956
Role of SEBI in regulating Derivatives market and SEBI Act, 1992
Important rules and regulations on trading in Derivatives market
Regulations in clearing & settlement and risk management
Outline major recommendations of the L C Gupta Committee
Outline major recommendations of the J R Verma Committee
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
Features of RBI Circular ‘Guidelines on trading of Currency Futures in Recognized Stock / New Exchanges’
Salient features of SEBI Regulations for Currency Derivatives Exchanges
Explain the role of various regulators in Bond and Interest Rate Derivatives Market
Regulatory reporting requirements for Interest Rate Derivatives Markets
Role of FIMMDA in fixed income and derivatives markets in India
9. Accounting and Taxation
Accounting treatment for derivative contracts
Taxation of derivative transaction in securities
10. Sales Practices, Code of Conduct and Investor Protection Measures
Basic features of SEBI Codes of Conduct for Brokers and Sub-Brokers
Importance of risk profiling of clients in sales process
Importance of KYC and required documentation for investors to trade in Derivatives contract
Best practices in derivatives sales
Grievance redressal mechanism available to the investors
Nature of complaints considered by exchanges
Arbitration mechanism at exchanges