NISM-Series-VII Securities Operations and Risk Management Certification Examination
Test Objectives
Unit 1: Introduction to the Securities Market
1.1 Explain the Indian Securities Markets, highlighting its role in Indian economy
1.2 Explain the primary and the secondary market, the different avenues for raising money from the public in the primary market, the two mediums in the secondary market, the OTC and the Exchange traded market.
1.3 Define Money Market and the key features of the money market products.
1.4 Define the Equity market and its products such as equity shares, debentures, warrants etc,
1.5 Define the Derivative market and its products such as Index /Stock Futures,
1.6 Explain Currency derivatives
1.7 Define the Debt market and its products such as the Government Securities Market and the Corporate Debt Market.
Unit 2: Market Participants in the Securities Market
2.1Know the different market participants in the Indian Securities Market
2.2 List the different types of Investors based on their investment objectives, such as retail investors, high networth individuals and Institutional Investors
2.3 Briefly introduce the Issuers who raise money from the securities market.
2.3.1 Explain how money can be raised from international capital markets by way of GDRs, ADRs, FCCBs and ECBs.
2.4Explain about the Intermediaries in the Indian Securities Market viz., define what are stock exchanges, their role in the market, discuss about the Clearing Corporation /Agency and the role performed by them, Define and discuss who are trading members, depositories and depository participants and the Custodians.
2.5 Explain the regulatory framework for the securities market in India and the role of Securities and Exchange Board of India.
Unit 3: Introduction to the Securities Broking Operations
3.1 Explain the Trade Life Cycle and the Steps and Participants involved in a trade life cycle.
3.1.1 Explain how affirmation and confirmation for Institutional Clients are done;
3.1.2 Explain how custodial transactions are executed,
3.1.3 Define and Explain Clearing and Settlement of executed trades.
3.2 Understand the various Front Office Operations
3.2.1 Learn about Client On-Boarding and Registration;
3.2.2 Explain the role of sales in front office.
3.2.3 Explain how an account is opened for trading purposes, the various documents required for it.
3.2.4 Explain the importance of KYC and define Unique Client Code.
3.3 Discuss about the Rights and Obligations (Member-Client Agreement)
3.4 Know about the Risk Disclosure Document
3.5 Explain Order Management,
3.5.1 List the different types of orders and how orders are placed through internet or through phone, discuss
3.5.2 Understand the process of order routing through the Exchange.
3.6 Explain how a trade is executed. Know about Order Placement and Trade Matching
3.7 Explain the various activities in a Middle Office in a securities broking firm
3.7.1 Explain Risk Management practices and the Surveillance mechanism in place
3.8 List the various activities in Back Office Operations.
3.8.1 Define Trade Enrichment
3.8.2 Explain the procedure of trade allocation, Trade Confirmation/Modification.
3.8.3 Discuss the Clearing and Settlement Process.
3.8.4 Define accounting and the different accounts which a broker has to maintain.
3.9 Explain the role of Information Technology in a broking firm
3.10 understand the different Regulatory Compliances which a broker needs to comply.
Unit 4: Risk Management
4.1 Discuss Risk Management in Cash Segment
4.1.1 Understanding about Margin, Value at Risk, Mark to Market & Extreme Loss
4.1.2 Understand about Liquid Assets
– Know about the Liquidity Categorisation of Securities
– Learn about the Calculation of Mean Impact Cost
– Know the Margining of Institutional Trades in Cash Market (Shortfall of Margins / Pay-in of funds, Base Minimum Capital, Additional Margins, Margins from the Client, Provision of early pay-in, Pre-trade Risk Controls, Order Level Checks, Dynamic Price Bands, Risk Reduction Mode)
4.2 Discuss Risk Management Framework for F&O Segment
4.2.1 Understand the different Types of Margins (Initial Margin, Exposure Margin, Premium Margin, and Assignment Margin
4.2.2 Know the Reporting and Disclosure
4.2.3 Know about the Liquid Net Worth and Exposure Limits of a Clearing Member related to- Liquid Assets
4.3 Discuss Compliances and Regulatory Reporting
4.3.1 Summarize Compliances and Regulatory Reporting
4.3.2 Explain the penalties levied if the brokers fail to maintain or furnish documents as prescribed under regulations
4.3.3 Discuss the various types of books to be maintained and the timeline for Submission of Various Periodic Reports
4.3.4 Explain why and how account statements are sent to the clients of the brokers.
4.3.5 Risk Based Supervision of Market Intermediaries
4.4 Know about the Core Settlement Guarantee fund
4.4.1 Corpus
4.4.2 Contribution to Core SGF
4.4.3 Default waterfall
4.4.4 Stress testing and back testing
Unit 5: Clearing Process
5.1 Explain step by step the Clearing Process
5.2 Explain the Role of a Clearing Agency in the clearing process of a trade.
5.3 Define Clearing Banks and explain their functions
5.4 Define and Explain Clearing Members/Custodians
5.5 Explain the role of Depository and Depository Participants
5.6 Explain the Clearing Process
5.6.1 Differentiate between the clearing process in case of equities trading and in case of derivatives trading.
5.6.2 Understand Determination of Obligation of Clients,
5.6.3 Explain how Balancing/Netting of Client Accounts are done within the brokers firm
5.6.4 Explain how broker netting is done within the Exchange.
Unit 6: Settlement Process
6.1 Understand the Settlement Cycle
6.2 Understand the settlement procedure in case of Internet based trading and order placed on phone
6.3 Understand the Settlement of Funds
6.3.1 Explain how obligations are informed to the clients and custodians,
6.3.2 Understand Margin Payments
6.3.3 Explain about settlement dues.
6.4 Understand the Settlement of Securities
6.4.1 Explain the settlement process through the depository clearing system
6.5 Understand what are corporate actions and its Adjustment
6.5.1 Discuss about Methodology for Adjustment
6.6 Explain Auction of Securities
6.6.1 Understand the procedure for Auction of Securities.
6.6.2 Explain when auction is carried out.
6.6.3 Explain the auction of securities on the BSE and on the NSE.
Unit 7: Investor Grievances and Arbitration
7.1 Explain the importance of investors and how the grievances of the investors are redressed
7.2 Discuss the procedure followed to redress investor grievances
7.3 Learn the guidelines for IPF / Customer Protection Fund (CPF) at Stock Exchanges
7.4 Understand what arbitration is and the exchange procedure to handle arbitration matters. Explain the role of appellate arbitration.
Unit 8: Other Services Provided by Brokers
8.1 Explain the various other services which a broker offers to its investors.
8.2 Understanding IPO applications
8.2.1 Explain how IPO applications are treated at brokers end.
8.2.2 Explain the procedure of collection of IPO application forms
8.2.3 Explain the ASBA facility.
8.3 Explain how mutual funds units are traded on the exchange.
8.4 Explain what Portfolio Management Service is and how do broker engage in it.
8.5 Explain the role of research in a broking firm
8.6 Explain the Depository Services provided by the brokers.
8.7 Explain the concept of margin trading and its importance.
