Currency Market Module (NISM) is a certification program in which students are taught to deal with the currency market. Some people may like to invest in equity, some may be interested in mutual funds or the commodity market. Similarly, those who are interested in the currency market can trade in it. The currency market is completely different from the stock market. Investors who invest in the stock market can hold the shares of a company for a long period and they are called the shareholders of the company, but in the currency market, you trade between currencies of different countries. In the currency market, you can only trade in the derivatives segment.

Students trade in the currency as a ‘pair’ in which at least two currency is involved. An example of the pair might be USD-INR or GBP-INR. Fundamentals tools and technical charts are also used in the currency market to make buy or sell decisions. Before dealing in the currency market, prior knowledge of derivatives is also necessary to make good returns.

Course Content

Introduction to Currency Markets and Foreign Exchange Derivatives market

History of the foreign exchange market, Major currency pairs, Overview of the international market, Settlement date or Value date, OTC forward market, Economic indicators, Derivative market and Products, Market participants, Key economic function of derivatives.

Exchange Traded Currency Market Futures

Currency market terminology, Rationale behind currency futures, Difference between future and forward contract, Interest rate parity and pricing of currency futures, Computing payoffs from a portfolio of futures and trade remittances, Using currency futures for hedging various kinds of FX exposures, Use of currency futures by arbitrageurs, Trading spreads using currency futures, Limitations of currency futures for hedgers.

Clearing, Settlement and Risk Management in Currency Futures

Clearing vs. Settlement, Clearing entities, and Settlement Mechanism, Regulatory guidelines on open position limits, Margin requirements, Mark-to-Market Settlement, Periodic Risk Evaluation Report, Unique Client Code (UCC), Currency future contract specification, Entities in the trading system.

Exchange Traded Currency Options, Accounting and Taxation

Option in financial market, Style of option market, Moneyness of an option market, Basics of option pricing and Option Greeks, Option pricing methodology and Option pay offs, Uses of currency options, Clearing, Settlement and Risk Management for options, Name of accounts, Accounting entries for live positions, Disclosure requirements and Taxation of Currency Derivatives.

Regulatory Framework for Currency Market , Codes of Conduct and Investor Protection

Securities Contract (Regulation) Act 1956, Foreign Exchange Management, Regulatory framework for exchange and Framework for clearing corporations, Adherence to SEBI codes of conduct for brokers /sub-brokers, Grievance redressal mechanism for investors.