Common Derivative certificate Examination Overview

The various derivatives products available in the three derivatives segments, regulations, and risks associated with these products and the exchange mechanisms of clearing and settlement. It also covers knowledge competencies related to the understanding of the financial structure in India and the importance of the different rules and regulations governing the Indian securities market, especially those related to the exchange traded derivatives.

What are the course objectives?
  • Know the basics of the Indian derivatives market (covering Equity Derivatives, Currency Derivatives, and Interest Rate Derivatives).
  • Understand the various trading and hedging strategies that can be built using futures and options.
  • Understand the clearing, settlement and risk management as well as the operational mechanism related to the derivatives markets.
  • Know the regulatory environment in which the derivatives markets operate in India.
Course Fees ?

Fees Details

Name of Examination: NISM-Series-XIII: Common Derivatives Certification Examination

Fees (Rs.) Test Duration (in minutes) No. of Questions Maximum Marks Pass Marks* (%) Certificate Validity (in years)#
3000+ 180 150 150 60% or 90 marks 3

* Negative marking – 25% of the marks assigned to the question.
+ Payment gateway charges extra.
# Passing Certificate will be issued only to those candidates who have furnished/updated their Income Tax Permanent Account Number (PAN) in their registration details.

Benefits from this Course ?
  • All approved users and sales personnel of trading members of currency derivatives, interest rate derivatives and equity derivatives segments of recognized stock exchanges
  • Interested students/professionals
  • Any other individuals

Common Derivative Syllabus 

CHAPTER-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

CHAPTER-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.)

CHAPTER- 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

Delivery aspects of IRD contracts including conversion factor, invoice amount, cheapest-to-deliver bond

Chapter – 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

Chapter – 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

Chapter – 6: Option Trading Strategies – Strategies using Equity Options and Currency options

Options 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

Chapter – 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

Chapter – 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

Chapter – 9: Accounting and Taxation

Accounting treatment for derivative contracts

Taxation of derivative transaction in securities

Chapter – 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