CH 1 .

Introduction to the Indian Currency Market

 Later people deposited the number of coins into banks and got a paper
promising that at any point in time, the value of paper would be equal to
the number of coins exchanged. That system was against the start of paper
currency
 Every country had its own brand alongside its flag. When money is branded
it is called currency
 When currency is exchanged it is known as FOREX of FOREIGN EXCHANGE
 The country that has more foreign reserves that country is known as a
strong

EVOLUTION OF MONEY

BARTER SYSTEM ---- GOLD--- METALS---- PAPER-----CARD----ELECTRONIC

PAYMENT----CRYPTOCURRENCY

 1870 - Countries valued their currency rate using gold as the

benchmark
Eg: 10 grams of gold Rs. 10000/ USD . 500 = Exchange rate 20 INR = 1
USD

 This mechanism is known as gold standard

 1947- 1971 – Countries followed Bretton Woods System which is a
blended of gold standard and floating rate system
 All currencies were pegged to USD and USD was pegged to gold
 USD became the dominant currency of the world
 Bretton Woods suspended and developed countries moved to
market-determined exchange rates and developing countries
moved to pegged currency or managed rate

CURRENCY
  EUR/ USD – Most traded pair

 USD

- Widely traded currency ( Other names)

- This is also known as investment currency – Capital market
- Reserve Currency – Central Banks
- Transaction currency – International Commodity market
- Invoice Currency – many contracts
- Intervention Currency – Market Operations
- Vehicle Currency – Reduces the no of pairing
Eg: If India wants to trade in other 4 countries, then India has to
maintain 4 currencies, rather than that if the base currency USD is
used then it reduces the pairing which is known as vehicle
currency
INR – USD
EUR
JYP
GBP

 EUR- Second international currency

 JPY- Third most traded
 GBP – The nickname is Cable
 CHF- The Swiss Franc is the currency of Switzerland and used as reserve
currency
 Currency market is open for 24 hours
 When two currency are compared against each other is known as currency
pair

Base Currency and Quotation Currency

Eg: EUR- USD ( Base/ Quotation)
EUR- Base Currency that is priced and its amount is fixed at 1 unit
USD- Quotation currency, which prices the base currency and its amount, varies
as the price of BC varies in the market
 In the international market USD is the universal base currency

FOREIGN EXCHANGE MARKET :

 Two segments of the Foreign Exchange Market

a) Interbank Market
b) Merchant Market

 Authorized dealer- As per the Foreign Exchange Management Act,

any entity, bank, or individual who has been authorized to deal in
foreign currency

 Interbank Market – exchange of currency between two banks from

the authorized person. The mechanism of quoting prices for buying
and selling is called market-making since he is quoting the two-way
price. The price quoted by the buyer is called the bid price and the
price quoted by the seller is called the sell price. The difference
between bid and ask is called the spread.

Eg: Canara bank sells USDINR to Standard bank

 Merchant Market - exchange of currency by general public/

merchant with bank by authorized person. Merchants are price
takers and banks are giver
 USDINR – quoted upto 2 decimal
 Other currency- quoted upto 4 decimal

Appreciation/ Depreciation
 Eg: USDINR has moved from 68 to 68.05 , it means USD has
appreciated and INR has depreciated

 Market Timings: 9:00 AM- 5:00 PM

 9:00AM – 4:30:00PM – Merchants/ general public
 4:30 – 5:00 PM – Interbanks to square off excess
position
 Interbank rate – When large transactions are done two banks
set their own price which is available in the market is called the
interbank rate (IBR).
 Card rate – For small-value transactions banks publish a
standard rate for the entire day is called card rate. On high
volatility card rate can be revised by banks.
 Price Discovery – When buyer and seller trade matches is
known as equilibrium price/ price discovery.

 RBI Reference Rate/ FBIL ( Financial benchmark India Private

Limited)-
 FBIL is recognized by RBI and assumed the responsibility
of computation from July 10,2018
 RRR is a poll done at 11:30AM -12:30PM by RBI for spot
price and for next 24hours all the transactions are done
on that rate published by RBI for various currency
players

Settlement Date or Value Date :

Gross settlement: Counterparty exchange goods traded on maturity of contract is
called gross settlement
Net Settlement: market participants settle only the difference is called net
settlement
Transaction date: Date of contract
Settlement date: Maturity where the counterparty actually exchanges currency
Spot value date: Settlement after 2 business days where both the centers are
open

Trade Date ---------- T+1----------T+2---------forward

(cash rate)-----------Tom ---------SPOT

 Any settlement after the spot value date is called the forward value date
 Any settlement on the trade date is called a cash rate
 Any settlement after the trade date is called Tom rate
 Any settlement before spot date the price is derived from spot and not
traded price
OTC Forward Market :
 Parties decide the price, date , qty mutually
Exchange Rate Arithmetic- Cross Rate :
When currency pairs are not directly available trades are done in cross-currency.
Eg: Buy – USDINR
Sell – GBPINR
IMPACT OF ECONOMIC INDICATORS ON CURRENCY MARKET
1) GDP – The total market value of goods and services produced in a country
in a year is GDP. A GDP rate higher than the expected rate means a
relatively strengthening currency.
2) Retail Sales- Spending capacity of consumers. Higher sales indicate which
means currency would be strong. Retail sales are published by United State
Census Bureau in the US
3) Consumer Price Index- (CPI)- It is an indicator for inflation. A rise in price for
goods and services indicates inflation.
4) Non-farm payroll- Employment added or lost in an economy
 5) Import/ export Growth- Measures the balance of payment in the economy-
Import is more than export increases the balance of payment. Export is
more than Import which increases the foreign reserve.

MOCK QUESTIONS
1. Exchange of goods and services was made between parties through a
mechanism known as Barter System
a) True
b) False
2. Central Bank issue paper currency and hold equivalent amount of Gold in
their reserve. The value of each currency against another currency is
derived from Gold Exchange Rate
a) Cross Currency Standard
b) Central Reserve Standard
c) Gold Standard
d) Central Gold Standard

3. In 1944-1971 countries adopted a system that was a blend of gold standard

system and floating rate system, as a part of the system currency was
pegged at fixed rate and USD was pegged at a gold rate
a) Fixed wood system
b) Floating wood system
c) Gold Standard System
d) Bretton Woods System

4. CAD and CHF stands

a) Australian Dollar and Canadian France
b) Canadian Dollar and Swiss Franc
c) Canadian Dollar and Canadian Franc
d) Euro and Japanese Yan

5. US Dollar is widely traded also known as

a) Investment currency and Reserve Currency
b) Transaction currency and Invoice Currency
c) Intervention currency and Vehical Currency
d) All of the above

6. Use of USD as a vehical currency greatly __________ the number of

exchange rate that must be dealt with a multilateral system
a) Increases
b) Reduces
c) Equates
d) Either a or b

7. In a system of 100 currencies with no vehical currencies, potentially there

would be ____ currency pairs or exchange rate.
Formula : n(n-1)/2
= 100( 100-1)/2
a) 999
b) 1000
c) 4950
d) 4590

8. Every trade is the FX market is acurrency pair where one currency is bought
with or sold for another currency. Two pair of currency is called
a) Foreign and Domestic Currency
b) Base currency and Quoting Currency
c) Quoting and Base currency
d) Vehicle and Investing Currency
9. _________ is the market between banks where dealers quote price at the
same time for both buying and selling the currency
a) OTC market
b) Exchange traded market
c) Interbank market
d) Merchant market
 10.A vegetable vendor quotes prices only for selling whereas in a wholesale
market, at the same time he also quotes buying price from the farmer also
quotes price to sell in retail market. Therefore the wholesaler is known as
_______
a) Merchant seller
b) Market maker
c) Intermediary
d) Wholesale merchant

CH 2 FOREIGN EXCHANE DERIVATIVE -

DERIVATIVE
 It is a product whose value is derived from the value of one or more basic
variables called bases.
  Securities Contract Regulation Act ( SCRA) defines derivatives a security
derived from a debt instrument, share, loan whether secured or unsecured,
risk instrument or contract differences or any other form of security.
 It give the participants the ability to buy the underlying without paying for
it fully (in cash) – margin money is paid
FORWARDS
 Customised OTC contracts between 2 parties where settlement takes place
on a specific date at today’s pre agreed price
Eg: A and B decided to trade USDINR at 63.50 after 3 months
 Counterparty risk
OPTIONS:
One of the party has the right to buy/ sell and another has obligation
FUTURES:
Buyer and seller agrees into an agreement with the Exchange
SWAP :
It is an agreement between two parties to exchange cash flow in the future
according to a prearranged formula
Eg: A – Buyer
B- Seller
Post Swap : A- Seller
B- Buyer

CH 3. EXCHANGE-TRADED CURRENCY FUTURES

FUTURES :
 Standardized contract traded on exchange
 Both the parties must fulfill their obligation on the settlement date
  Initial margin is required to enter into any trade
 Currency has 12 months expiry contracts
 Tick size of currency contract is 0.0025

 Value Date/ Settlement Date- Monthly expiry ( T+2)

 Expiry Date – 2 days prior to settlement date

 Marking to Market – At the end of the trading day the profit and loss are
adjusted

 Market Participants: Access to all types of market participants such as

MSME as well, retailers

 OTC is restricted to authorized dealers in foreign currency

 Interest Rate parity : Difference between spot rate and future rate of
currency pair on expiry is known as IRP

Q. 1 ____________ is the minimum size of price change and the market price
change only the market price change only in multiples of them.
a) Bid Ask Price
b) Tick Size / Pips
c) Intrinsic value
d) Tick Value
2) Assume you buy a USDINR contract at Rs. 74.50 one tick move on this contract
will translate to _______ depending on the direction of market movement.
Note: Price can move up and down
a) Rs. 74.495
b) Rs.74.5025
c) Rs. 74.75
d) Both a and b

3) ________ is the current price at which the underlying asset is traded in the
spot market whereas ______ is the current price of the specified futures contract
a) Cash price and Derivatives price
b) Spot price and Futures price
c) Spot price and Forward price
d) Last traded price and leveraged price

4) _________ is the day on which trading ceases in the contract and is two days
prior to the final settlement date.
a) Expiry date
b) Last Trading Day
c) Only a
d) Both a and b

6) In the context of a futures contract where the buyer puts a small fraction of
their own money or makes a down payment he is said to have paid the
_______.
a) Interest money
b) Margin money
c) Initial money
d) Mark to market margin
 7) In the futures market, at the end of each trading day the mark to market
margin is ______.
a) Adjusted depending on the last traded price
b) Adjusted to reflect the investor gain or loss depending upon the futures
closing price
c) Adjusted on the basis of the average of the last half an hour
d) Adjusted against the initial margin deposited with the approved broker

8) In the absence of Interest Rate Parity, arbitrage opportunity ______

a) Exist
b) Does not exist
c) Deviated to 2 standard deviation
d) Incomplete information
Arbitrage( buying from 1 market and selling into another) can only exist in those
country where there is no interest rate in 2 countries

9) Suppose the interest rate in India is 10%p.a and in the USA is 2%p.a. . the
current USDINR spot rate is Rs.90. What is the likely 6 month USDINR
futures prices?
a) Rs. 97.20
b) Rs.100.80
c) Rs. 93.60
d) Rs.95.40

Calculation of Futures : INR – 10%

USA – 2%
Difference – 8% p.a
6 months – 4%
USDINR Futures after 6 months – 4*90/100 = Rs.3.60
Futures= Rs.93.60
 Q.9 In any currency pair, the Future value of a currency with a high-interest
rate is at a discount (in relation to spot price) to the currency with a low
interest rate.
a) True
b) False

Q.10 If Domestic currency depreciates against the foreign currency, the exposure
would result in _______
a) Gain for residents purchasing foreign assets
b) Loss for non-residents purchasing domestic assets
c) Loss for residents purchasing foreign assets
d) Both a and b

Ch 4 Strategies in Foreign Currency

Mock Questions:
1. ___________participants have a real exposure to foreign currency
risk on account of their underlying business and their objective is to
remove FX risk using currency futures.
a) Speculators
b) Hedgers
c) Arbitrageurs
d) Banks

2. A shoe exporter from India buys all its raw material domestically and
sells all it goods to Europe. Assume he has shipped an order of EUR 1
million for which payment will be received after 3 months. During
this 3 million credit period, shoe exporter is carrying ______
a) Risk of INR price movement
b) Risk of EURINR price movement
c) Risk of EURUSD and INRUSD price movement
d) All of the above

3. Speculators are those market participants who ______

a) Does not have a real exposure to Foreign currency risk
b) Assume FX risk by taking a view on the market direction
c) Hope to make returns by taking the price risk
d) All of the above

4. A high net worth individual in India is keen to invest in Gold with a

view of rising Gold prices against USD. He invested via ETF gold
contract which are exchange traded and priced in INR. After three
months of investment in ETF, Gold appreciated by 15% against USD
while ETF appreciated by only 10%. This low appreciation of ETF was
because of _______
a) 5% appreciation is USD against INR in last three months
b) 5% appreciation in INR against USD in last three months
c) Due to Interest rate parity
d) Due to arbitration opportunity that exists in two different market (gold and
Currency)

5. When an HNI in India is keen to invest in Gold via ETF he is faced

with______
a) USDINR risk in ETF
b) Gold related risk
c) Only b
d) both a and b

6. Spread refers to difference in prices of two futures contracts Spread

movement is based on _______ factor.
Explanation : Difference between 2 futures price eg: Jan Rs.82.50 and Feb
Rs. 82.80 can be because of all the reasons
a) Interest Rate Differentials
b) Liquidity in Banking system
c) Monetary Policy ( Repo Rate, Reverse Repo, CRR)
d) All of the above

7. The objective of hedgers is to reduce the volatility in uncertain

Future cash flows by locking in the Future Currency rates.
a) True
b) False

8. A trader has a view that the INR may appreciate in next six months
from current level of 66 to 64. To execute the view, he shorts 100
contracts at a price of 67.5. As expected, INR appreciated. At the
expiry of the contract, the settlement price was 64.5. How much
profit/loss did the trader made on his transaction.
a) Profit of Rs.300( Rs 3* 100)
b) Profit of Rs. 3,00,000 (Rs. 3*100*1000)
c) Loss of Rs. 3000 (Rs.3*100)
d) Loss of Rs. 3,00,000 (Rs. 3*100*1000)

9. Exchange traded currency futures contracts are standard contracts

which are settled in cash i.e without delivery of currencies.
a) True
b) False

10.______ is a long- short position in Futures on different underlying

currency pairs both typically have the same maturity.
a) Intra currency pair spread
b) Calendar spread
c) Inter currency pair spread
 d) None of the above
Eg: 25th April USDINR buy
25th April EUR INR Sell

Ch 5. Trading in Currency Futures

 Lot size : JPY 1,00,000

 Other currency 1000
 Expiry of currency futures – 2 working day of last business day at 12:30PM
 Last working day – Final settlement ( T+2)

1. In INR currency pair the underlying is quoted as

Eg: USD ( base)/ INR ( Quote)
a) INR as base currency
b) INR as Quoting currency
c) Foreign currency as base currency
d) Both b and c

2. The contract size for INR currency pair (i.e. USDINR, GBPINR, EURINR,
JPYINR) is ______.
a) USD 1000, GBP 1000, EUR 1000, JPY 1000
b) USD 1,00,000, GBP 1,00,000, EUR 1,00,000 and JPY 1,00,000
c) JPY 1,00,000, USD 1000, GBP 1000, and EUR 1000
d) GBP 1,00,000, USD 1,000, JPY 1000, and EUUR 1000

3. In case of Currency Futures the Last trading or the expiry day

a) Last working day of the expiry month
b) Two working days prior to the last business day of the expiry month at
12:30PM
c) Final settlement day
d) Inter-bank settlement day

4. The Last working day of the expiry month is the Final Settlement day.
a) True
b) False

5. In case of currency futures contract, prices are settled on______

a) Daily settlement price basis
b) Final settlement price basis
c) Only b
d) Both a and b

6. The basis of settlement in currency futures contract is that the daily mark
to market settlement is on a ____ basis and final settlement will be cash
settled on ____basis.
a) T +1 and T+2
b) T +1 basis
c) T+2 basis
d) T +2 basis and T+ 1 basis

7. The daily settlement price is ________

a) Announced by the Exchange
b) Based on volume weighted average price in the last half an hour of trading
c) The theoretical price if there is no trading in the last half hour
d) All of the above
8. The final settlement price is the RBI reference rate.
a) True
b) False
 9. TWS stands for
a) Trading Work Screen
b) Trader Workstation Screen
c) Tenor or weekly
d) None of the above

10.A member with the right to trade on its own account as well as on account
of its clients is known as
a) Trading member
b) Clearing member
c) Trading cum clearing member
d) Professional clearing member

Ch 6. Clearing Settlement and Risk management

1. A defaulting member’s client’s position could be transferred to_______ by

the Clearing Corporation.
a) Another solvent member
b) The Exchange
c) A suspense account
d) Error account
Eg. Karvy broker when defaulted Demat account transferred to Axis and Trading
account transferred to IIFL
2. In system of 50 currencies with no vehicle currencies, potentially there
would be ________Currency pairs
Formula : n(n-1)/2
a) 25
b) 252
c) 1225
d) 50
50(50-1)2 = 50(50-49)/2 = 1225
3. For USDINR Currency futures, previous day settlement price is 56 and
Today’s settlement price is 55.50. Bunty buys 20 contracts forward from
previous day. What is the MTM settlement?
a) Rs. 11,20,000
b) Rs. 11,10,000
c) Rs.10000
d) Date Insufficient

4. Liquid assets maintained by Mr.A( Clearing Member) are higher than that
maintained by Mr. B( Clearing Member). Which of the following statements
is true?
The one who maintains more deposits gets higher exposure
a) Mr. A can enjoy higher exposure levels in futures than Mr.B
b) Mr B can enjoy higher exposure levels in futures than Mr. A
c) Both Mr.A and Mr. B enjoy the same exposure levels
d) No need to maintain liquid assets for exposure in derivatives markets

5. Initial margin requirements are based on the value at risk over a one day
time horizon
Out of 100 days it should not reach 99 days
a) 50%
b) 75%
c) 99%
d) 100%

6. The Final Settlement price of USDINR currency futures is ______

a) The Closing price on expiry date
b) Average of Last Traded price, half hour prior to closing
c) RBI reference rate which is declared at 1:30PM on last trading day
d) The price mentioned in the Exchange website

7. Daily settlement price for Mark to Market settlement of futures contract

shall be based on the last 30 minutes volume weighted average price of
such contract exchanges.
a) True
b) False

8. Trader A wants to sell 20 contracts of Aug series at Rs.4500 and B wants to

sell 17 contracts of Sep series at Rs.4550. Lot size is 50 for both these
contracts. The Initial Margin is fixed at 6%. How much Margin is required to
be collected from both these investors (sum of initial margins of A and B) by
the broker?
a) 2,70,000
b) 5,02,050
c) 2,32,050
d) 4,10,000

9. Which of the following best describes the total open interest which is used
for the purpose of monitoring of open position during the day?
a) Minimum open interest in the previous day
b) Total open interest at the time of monitoring
c) Total open interest at end of the previous day
d) Maximum open interest in the previous day

10.A member has two clients C1 and C2, C1 has purchased 800 contracts and
C2 has sold 900 contracts in August XYZ futures series. What is the
outstanding liability of the member towards Clearing Corporation in
number of contracts?
a) 800
b) 1700
 c) 900
d) 100

Ch 7. Exchange Traded Currency Options

1. For a person who is trading in both currency futures and currency options,
the pen interest would be monitored for combined gross positions in
futures and options.
a) True
b) False

2. A call option is said to be ITM when _________ whereas a Put option is said
to be ITM when ______
a) Spot price> Strike Price
b) Strike= Spot
c) Strike> Spot
d) Both a and b

3. An active trader in currency options market wants to execute his view on

change in volatility over a period and wants to be insulated from changes in
other factors impacting option pricing. What option strategy is he likely to
use?
a) Short option
b) Long option
c) Covered Call
d) Calendar Spread ( Buy Jan – Sell Feb)

4. ____ option has zero intrinsic value.

a) ITM
b) OTM
c) ATM
d) Both b and c

5. Formula for computation Option Premium is ______

a) ITM- OTM
b) ITM- Intrinsic value
c) Intrinsic + Time
d) ITM + Time value

6. A trader sells lower strike price call and buys higher strike price call both of
same scrip and expiry date. The strategy is
a) Bearish Spread/ Bear Call spread
b) Bullish Spread
c) Calendar Spread
d) Strangle

7. Where all other factors affecting an options price remain same, the time
value portion of an options premium will decrease with the passage of
time. This is known as _________
a) Time value
b) Time money
c) Time decay
d) None of the above

8. The breakeven point for a short call position will also be equal to________.
a) Strike Price- Premium paid
b) Spot Price – Premium received
c) Strike price + Premium paid
d) Strike price – premium received
 9. If you are a seller in the option you ____.
a) Can be assigned to exercise option any time during the life of option
contract
b) Maximum profit is the premium received
c) Your potential loss is theoretically unlimited
d) All of the above

10.The five key determinants of a currency options price other than the
currency price and the strike price is
a) Volatility - Vega
b) Time to expiration – Theta
c) Short term Interest rate – Rho
d) All of the above

Ch 8. Accounting and Taxation

1. When members who offer the scrip is an auction fail to deliver the same,
the outstanding transaction is________.
a) Postponed for the next working day
b) Reported to SEBI
c) Annulled
d) Closed Out

2. What are the basic accounting heads to be maintained by any market

participant for maintaining currency futures accounts?
a. Initial margin – currency futures
b. Profit and loss – currency futures
c. Mark to market – currency futures
d. Initial margin- currency futures and mark to market – currency futures
3. Which of the following best describes the key aspect of discretionary
trading done by trading member in account of its clients?
a) Trading member can use his discretionary power to trade to the extent of
1000 lots on behalf of his client per day
b) The clients has given written authorization to a stated individual to use
discretionary powers
c) The clients has given prior written authorization to a stated individual to
use discretionary powers and the account has been accepted by the
Trading member
d) Trading member can use discretionary power to trade to the extend of 10%
of the client net worth on behalf of the client

4. In a system where no vehicle currency is used to calculate the currency

pair, exchange rates, the formula is _____
a) n/2
b) n(n-1)/2
c) (n-1)/2
d) (n-1)(n-2)

5. The maximum net NPA% which an AD Category (Authorized dealer) bank

can have it to become a Trading and Clearing member of any recognized
Currency Futures Exchange is _____
a) 1%
b) 2%
c) 2.5%
d) 3%

6. What is the process of Actual Pay In/ pay out of Mark to market margin or
profit/ loss on cancellation or on maturity of Futures contract called?
a) MTM
b) Clearing
c) Pay in/ Pay out
 d) Settlement

7. Extreme loss margin deducted from the Liquid assets of Clearing member
on Real time basis.
a) True
b) False

8. If there is no trading in the last half an hour , _______ price will be MTM
settlement price.
a) Previous days closing price
b) Daily settlement price
c) Theoretical Settlement ( Spot cost of carry)
d) None of the above

9. STT is the Securities transaction Tax that is levied on _______ of securities

that are listed on the Indian stock exchanges.
a) Purchase
b) Sale
c) Both a and b
d) Net of a and b

10. In case of sale of a futures and options in securities, the STT is payable by
both buyers and the sellers.
a) True
b) False

Ch 9. Regulatory Framework
1. Clearing member net worth after adjusting for initial margin and Extreme
loss margin requirement must be atleast 50 lacs at all point in time.
a) True
b) False

2. Who receives End day report from all branches and dealers under same
trading member?
a) Corporate manager
b) Branch manager
c) Trader
d) Dealer

3. ___________ recommended introduction of Exchange Traded Currency

Futures in India
a) Ministry of Finance
b) NSE Currency Futures Committee
c) Currency Futures Standing Committee
d) RBI- SEBI Standing Technical Committee

4. As per the Forex Management Act, an AD category 1 bank should have a

minimum net worth of ____ to become a Trading and Clearing member of
Currency Futures segment and recognized Stock Exchange.
a) 50Cr
b) 100 Cr
c) 300 Cr
d) 500 Cr

5. Which of the following acts is mainly responsible for governing the

securities trading in India?
a) FEMA, 1999
b) SC(R) A – Securities Contract Regulation Act
c) SEBI
d) The Companies Act

6. What is the minimum net worth for accompany for it to be eligible for
applying to become an authorized exchange for currency futures?
a) Rs. 200 cr
b) Rs. 100 Cr
c) Rs. 50 Cr
d) Rs. 75 cr

7. One of the key difference in OTC and exchange traded USDINT currency
option market is related to
a) Lot size
b) Requirement of proof of underlying FX transaction
c) Market timings
d) Both b and c

8. For a person who is trading in both currency futures and options the open
interest would be monitored for combined gross positions in futures and
options.
a) True
b) False

9. Brokers of recognized Stock Exchange should promptly issue _____ to his

clients as well as clients of his sub broker
a) Transaction Note
b) Brokerage Note
c) Notes of Accounts
d) Contract Note
 10.A vegetable vendor near you quotes prices only for selling whereas in
wholesale market the vegetable wholesaler quotes prices for buying
vegetables from the farmer and also quotes prices for selling to retail then
the vegetable wholeseller in the wholesale market is _______
a) Merchant seller
b) Market maker
c) Intermediary
d) Wholesale merchant

Ch 10. Code of Conduct

1. Traders grievance against any trading member are settled by arbitration.
The arbitrator conducts the process and passes an award normally within
___ from the date of initial hearing.
a) 15 days
b) 45 days
c) 1 month
d) 4 months

2. Which of the following organizations issues guidelines for accounting of

currency futures contracts?
a) ICSI
b) ICWAI
c) IIM
d) ICAI

3. Which of the following best describes the guidelines for brokers with
respect to execution of client order?
a) Promptly intimate the execution and non execution of order
b) Intimate the execution or non execution within 2 hours of delay
c) By the end of the day
d) Within 3 hours of dealing
 4. The currency futures segment exchanges has separate governing council on
which the representative of Trading and clearing member of currency
futures segment does not exceed____
( only 25% of members of Trading and Clearing member of currency should be
apart of governance council)
a) 25%
b) 50%
c) 75%
d) 99%

5. A paddy farmer buys weather insurance to protect from less rainfall. Its like
a derivatives contract where the underlying is ____
a) Whether temperature recorded
b) Storms and Hurricane
c) Actual rainfall
d) Paddy grown

6. An employee of a broking firm has started giving advice on taking trading

on USDINR currency futures on TV. Which of the following best describes
the steps that broking house needs to take to ensure that its employee
complies with guidelines.
a) Employee to also disclose the proprietary interest
b) Employee to be presentable
c) Employee to share analysis

7. The partcipants are given a document at the signing of agreement in

derivative
a) Operational Risk Disclosure document
b) Model Risk Disclosure document
c) Counter part risk document
8. Which of the complaints can be taken by Exchange?
a) Notional loss
b) Trades not executed on exchange
c) Private dealing by sub broker
d) Excess brokerage charged by trading member

9. SCORES enables_______
a) Investors to lodge
b) Follow up complaints
c) Track status of redressal
d) All of the above

10.Which of the agreement a sub broker has to execute with clients?

a) Tripartite agreement between him, broker and client clearly specifying

rights and obligations