NISM 1: Lesson 9

The term “securities” defined in the SCRA act does not include:

Under SCRA act, Contracts in derivative shall be legal and valid if such contracts are:

1. Traded on a recognized stock exchange
2. They need not be settled on the clearing house of the stock exchange

Choose the correct option regarding trading of derivatives:

1. The trading of derivatives is governed by the provisions contained in the SC(R)A & the SEBI Act and the rules and regulations framed there under.
2. The trading of derivatives is governed by the rules and bye–laws of stock exchanges.

Choose the correct option regarding Currency Futures, according to amendment in Foreign Exchange Management Act, 2000

1. Currency Futures’ are standardised foreign exchange derivative contract.
2. Currency Futures are traded on a recognized stock exchange to buy or sell one currency against another on a specified future date, at a price specified on the date of contract.
3. Currency Futures include a forward contract.

A person resident in India may enter into a currency futures contract in a recognized stock exchange to hedge an exposure to risk, subject to conditions issued by RBI. True or False?

Scheduled Banks can participate in Currency Futures Markets, without any special permission requirement from RBI. True or False?

A non-resident person can also purchase or sell currency futures. True or False?

A member may not need to have separate membership of the currency futures market of a recognised stock exchange, if he is already a member of the equity derivative segment or the cash segment. True or False?

A bank cannot become a clearing or trading member of a recognized currency exchange, under minimum prudential norms, if:

The exposure of the banks, on their own account, in the currency futures market shall form part of their Net Open Position (NOP) and Aggregate Gap (AG) limits. True or False?

The position limits for various classes of participants in the currency futures markets, shall be in accordance with the guidelines issued by the SEBI. True or False?

RBI has allowed recognized stock exchanges to offer exchange traded currency options contracts on:

Choose the correct option:

1. The clearing of the currency derivatives market should be done by an independent Clearing Corporation.
2. The exchange must have an online surveillance capability which monitors positions, prices and volumes in real time so as to deter market manipulation.
3. The exchange shall have a balance sheet net worth of at least Rs. 10 crores.

Choose the correct option regarding currency derivative exchange:

1. The exchange should have arbitration and investor grievances redressal mechanism operative from all the four areas/regions of the country.
2. The exchange should have adequate inspection capability.

To start currency derivatives trading the segment should have at least ________ members.

A recognized stock exchange where other securities are also being traded, can set up currency derivatives trading by following :

1. The trading and the order driven platform of currency futures should be separate from the trading platforms of the other segments.
2. The membership of the currency futures segment should be separate from the membership of the other segments.

Choose the correct option with regards to clearing corporation:

1. A Clearing Corporation in the currency futures segment does not need SEBI approval to function.
2. A separate settlement guarantee fund should be created and maintained for meeting the obligations arising out of the currency futures segment.
3. A separate investor protection fund should also be created and maintained for the currency futures market.

Choose the correct option regarding clearing corporation:

1. The Clearing Corporation must ensure that all trades are settled by matching of buyers and sellers.
2. The Clearing Corporation should enforce the stipulated margin requirements, mark to market settlement, electronic funds transfer, etc.

The representation of Trading /Clearing Members of the currency futures segment in the governing council of the exchange  should not exceed:

Choose the correct option with regards to governing council of the currency future segment:

1. 50% of the public representatives on the Governing Council can be common with the Governing Council of the cash/equity derivatives segments of the Exchange.
2. The Chairman of the Governing Council of the currency futures segment of the Exchange need not be a member of the Governing Council.

The currency futures segment of the Clearing Corporation should be governed by a separate governing council which should not have any trading member representation. True or False?

Choose the correct option regarding the membership of a currency derivatives segment:

1. The membership of the Currency Derivatives Segment shall be separate from the membership of the Equity Derivative Segment or the Cash Segment of a recognized stock exchange.
2. Members in Currency Derivatives segment are required to seek separate registration from SEBI, in addition to their registration as members of existing stock exchanges.
3. The members of an existing segment of the Exchange would automatically become the members of Currency Derivatives Segment.

Banks & SEBI registered custodians are eligible to become professional clearing members for Currency Futures Derivatives. True or False?

Choose the correct option with regards to eligibility criteria for members of partnership/ corporate entity & its Dominant Promoter group:

1. If the applicant is a partnership firm/corporate entity, the applicant shall identify a Dominant Promoter Group at the time of making the application.
2. Any change in the shareholding of the company including that of the Dominant Promoter Group or their shareholding interest shall be effected only with the prior permission of the Exchange/SEBI.

A person who has not passed the certification program, considered adequate by SEBI can still become a trading member in the currency futures market. True or False?

Derivative trading is risky. Members are not required to make their clients aware of the risks involved in derivatives trading, as the onus is on the client. True or False?

Choose the correct option regarding member/ partner or director of a member. No entity shall be admitted as a member/partner or director of the member if

1. It has been adjudged bankrupt or a receiver order in bankruptcy has been made against him or he has been proved to be insolvent even though he has obtained his final discharge
2. It has compounded with his creditors for less than full discharge of debts
3. It has been at any time expelled or declared a defaulter by any other Stock Exchange or he has been debarred from trading in securities by an Regulatory Authorities like SEBI, RBI etc

Members have to make collateral deposit to the clearing corporation. Cash component of such deposit includes cash, and does not include:

Trading members and participants are entitled to appoint, with the approval of the Currency Derivatives segment of the exchange, authorized persons and approved users to operate the trading workstation. True or False?

Choose the correct option regarding Authorized persons:

1. Authorized Persons can collect any commission or any amount directly from the clients they introduce to the trading member who appointed him.
2. Authorized persons can receive a commission or any such amount from the trading member who appointed them as provided under regulation.