Derivatives Market (Dealers) Module

Derivatives Market (Dealers) Module

CURRICULUM

1.Introduction to derivatives (7 Marks)
Definition,
Products
Participants and functions (Types of members to be included)
Types of derivatives
Exchange-traded vs. OTC derivatives markets.
Derivatives market at NSE (including turnover)

2.Market Index: (8 Marks)
Understanding the index number
Index construction
Desirable attributes of an Index
Types of indexes
The S&P CNX Nifty (Introduction, components)
Applications of Index

3.Introduction to futures and options (10 Marks)
Forward contracts
Limitations of forward markets
Introduction to futures
Distinction between futures and forwards contracts
Futures terminology
Introduction to options
Option terminology
Distinction between Futures and options
Index derivatives

4.Application of Futures & Options (10 Marks)
Payoff for derivatives contracts (futures and options)
Difference between trading securities and trading futures on individual securities
Use of Futures (Only simple strategies of hedging, speculation and arbitrage)
Index futures
Stock futures
Use of Options (Only simple strategies of hedging, speculation and arbitrage)
Index options
Stock options

5.Trading (25 Marks)
Futures and options trading system
Entities in the trading system
Basis of trading
Corporate hierarchy
Order types and conditions
The trader workstation
The market watch window
Inquiry window
Placing orders on the trading system
Market spread/ combination order entry
Basket trading
Futures and options market instruments (include interest rate futures)
Contract specifications for index futures
Contract specification for index options
Contract specifications for stock futures
Contract specifications for stock options
Contract cycle
Eligibility of stocks for futures and option trading
Determination of market lot
Quantity freeze
Charges

6.Clearing and settlement (25 Marks)
Clearing entities
Clearing members
Clearing banks
Clearing mechanism
Settlement mechanism
Settlement of futures contracts
Settlement of options contracts
Special facility for settlement of institutional deals
Risk Management Systems (Volatility, types of margins & SPAN)
Adjustments for corporate actions

7.Regulatory framework (15 Marks)
Securities Contracts(Regulation) Act
Securities and Exchange Board of India Act, 1992
Regulation for derivatives trading
L.C Gupta committee Report
J.R Varma committee report
Rules, Regulations and Byelaws of NSEIL
Rules, Regulations and Byelaws of NSCCL
Accounting and Taxation issues