Curriculum-NISM-Series-IV: Interest Rate Derivatives Certification Examination
I. Introduction to Interest Rate, Interest Rate Instruments and Fixed Income Marke
A. Understanding the Interest Rate Concept
B. Fixed Income Securities
C. Type of Fixed Income Securities
D. Equity Securities v/s Debt Securities
E. Concept of risk-free interest rate
F. Term Structure of Interest Rates
G. Conversion of Rate into Amount
H. Accrued Interest
I. Spot Rate (Zero Rate) and Holding Period Return
J. Coupon, Current Yield and Yield-To-Maturity
K. Determining Cash Flow, Yield and Price of Bonds
L. Risk Measures
M. Role of the Debt Market
N. Primary and Secondary Debt Market in India
II. Interest Rate Derivatives
A. Derivatives: Definition and Economic Role
B. Products in Derivatives Market
C. Growth Drivers of Derivatives
D. Market Participants in Interest Rate Derivatives Market
E. Underlying of Interest Rate Derivatives
F. OTC versus Exchange-Traded Derivatives
III. Exchange Traded Interest Rate Futures
A. Interest Rate Futures
B. Pay off Charts for Futures Contract
C. Contract Specification of Exchange Traded Interest Rate Futures
D. Lot Size, Tick Size and Change in Contract Value for each Tick change
E. Rationale for Introducing Exchange Traded Interest Rate Derivatives in India
F. Advantages and Limitations of Future Contracts in Comparison to FRA
G. Interest rate futures price computation
IV. Exchange Traded Interest Rate Options
A. Basics of Options
B. Difference between futures and options
C. Style of options
D. Moneyness of an option
E. Basics of Option Pricing and Option Greeks
F. Option pricing methodology
G. Implied Volatility (IV)
H. Pay off Diagrams for Options
I. Contract Specification of Exchange Traded Interest Rate Options
J. Comparison of Exchange Traded IRO and OTC IRO
V. Strategies Using Exchange Traded Interest Rate Derivatives
A. Market participants
B. Hedging through Exchange Traded Interest Rate Derivatives
C. Option Trading Strategies
D. Use of Interest Rate Derivatives for Speculative Transaction
E. Use of Interest Rate Derivatives by Arbitragers
F. Trading spreads using ETIRD
G. Limitation of Interest Rate Derivatives for Hedgers
VI. Trading Mechanism in Exchange Traded Interest Rate Derivatives
A. List of Entities in the Trading System
B. Exchange Trading System
C. Order Management
D. Risk Management and Order Routing
E. Price Limit Circuit Filter
F. Trading Costs
VII. Clearing, Settlement and Risk Management in Exchange Traded Interest Rate Derivatives
A. Clearing and Settlement Mechanism
B. List of Entities in Clearing and Settlement of ETIRD
C. Interoperability among Clearing Corporations
D. Clearing Mechanism
E. Determination of Settlement Obligations
F. Position Limits
G. Settlement
H. Funds Settlement
I. Delivery Under Physical Settlement
J. Risk Management
K. Margin Collection by Clearing Corporation
L. Core Settlement Guarantee Fund
VIII. Regulatory Framework for Exchange Traded Interest Rate Derivatives
A. Securities Contracts (Regulation) Act, 1956 [SC(R)A]
B. RBI-SEBI Standing Technical Committee on Exchange Traded Currency and Interest Rate Derivatives
C. RBI guideline on Exchange Traded Interest Rate Derivatives
D. SEBI regulation and guideline
E. Regulatory guideline on participation of various entities in ETIRD
F. Role of FIMMDA in Fixed Income and Derivatives Markets in India
G. Eligibility Criteria for Members
IX. Accounting and Taxation
A. Accounting Guideline and Disclosure Requirements
B. Taxation of Exchange Traded Interest Rate Derivatives
X. Code of Conduct and Investor Protection Measure
A. SEBI’s Code of Conduct for Brokers
B. Investor Grievance Redressal Mechanism
C. Investor Protection Fund
D. Arbitration
E. Execution of Power of Attorney (PoA) by the Client in favour of the Stock Broker / Stock Broker and Depository Participant
F. Risk Disclosure to Client and KYC
