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