ACI Dealing Certificate New Version Exam (002-101) Practice Exam

The certification of ACI Dealing Certificate New Version Exam (having the code - 002-101) is a foreign exchange and related instruments focused certification from the ACI FMA (ACI Financial Markets Association). The ACI FMA (Financial Markets Association) is a global trade association in the field of foreign exchange formed in 1955 to boost professional wholesale financial markets community by introducing best market practice and principles of ethical conduct. The ACI FMA has 9,000 international members and 60 national associations.
The ACI FMA certification has five main topics which includes

• The Financial Markets Environment
• The Foreign Exchange
• The Rates (Money and Interest Rate Markets)
• The FICC (Fixed Income, Currency and Commodities) Derivatives and
• The Financial Markets Applications.

It is suitable for professionals in the foreign exchange, money markets, derivatives, and treasury operations.
Why is ACI Dealing Certificate New Version Exam (002-101) important?

• Recognized globally.
• Boosts your employability and career development for roles in front-office roles, including traders and dealers.
• Certifies your knowledge of money markets, foreign exchange, and derivatives.
• Validates your trading practices and knowledge of financial instruments.
• Validates your understanding of risk management and hedging strategies.
• Includes the knowledge of the Code of Conduct and ethical trading practices in forex by ACI FMA.
• Essential for compliance with international banking and market standards.
• Enhances credibility and competence in financial dealing operations.

Who should take the ACI Dealing Certificate New Version Exam (002-101) Exam?

• Foreign Exchange (FX) Trader
• Money Market Dealer
• Treasury Dealer
• Derivatives Trader
• Front Office Staff in Banks and Financial Institutions
• Financial Risk Manager
• Treasury Operations Specialist
• Relationship Manager in Financial Markets
• Treasury Sales Professional
• Investment Banker (Dealing/Trading Desk)

Skills Evaluated

Candidates appearing for the certification exam on the ACI Dealing Certificate New Version Exam (002-101) are assessed for:

• Working of Foreign exchange and money market.
• Financial instruments used in forex trade like, including bonds, derivatives, and repos.
• Trading practices, quoting, and executing trades.
• Risk management including market risk, interest rate risk, and credit risk.
• Pricing models, market conventions, and economic indicators.
• Hedging strategies.
• Regulatory requirements
• ACI Code of Conduct.

ACI Dealing Certificate New Version Exam (002-101) Certification Course Outline

Module 1. Financial Markets Environment

• Define financial markets and explain their main functions for the economy

• Define foreign exchange markets, money markets, capital markets and commodities markets.

• Describe how the main economic agents can impact financial markets.

• Outline how financial markets can be segmented under different criteria: term to maturity, product phase (primary and secondary), trade dates and settlement dates, location and regulation, and dealing structures.

• Distinguish between cash/spot and derivatives/Forward markets.

• Distinguish between regulated markets and OTC markets, and understand how both functions work.

• Identify the various types of regulated markets and their dealing structures

• Outline and describe the roles of the main participants in financial markets.

• Define the function of market-making, explain the incentives to make markets and the main risks involved in market making

• Understand how available information impacts the efficiency of markets.

• Explain the key functions of every phase of a financial markets’ transaction, from front office execution to settlement and reporting, distinguishing which steps are responsibility of the front, middle and back-office roles.

• Understand what are the FX Global Code, the Global Precious Metals Code and the United Kingdom Money Markets Code.

• Describe and outline the development of the FX Global Code, of the Global Precious Metals Code and of the United Kingdom Money Markets Code.

• Explain the scope, applications and objectives of the FX Global Code, of the Global Precious Metals Code and of the United Kingdom Money Markets Code.

• Define and identify the Market Participants of the FX Global Code, of the Global Precious Metals Code and of the United Kingdom Money Markets Code.

• Explain the leading principles of the FX Global Code and of the Global Precious Metals Code, as well as explain the underpinning principles of the United Kingdom Money Markets Code.

• Understand the Statement of Commitment to the FX Global Code, to the Global Precious Metals Code and to the United Kingdom Money Markets Code, and how the respective Statement outline the objectives of each of those Codes.

• Understand what are the main regulations applicable to financial markets and their products, as well as their scope, applications and objectives: Markets in Financial Instruments Directive 11 (MIFID 11, including its Regulation MIFIR), Market Abuse Regulation (MAR), Benchmarks Regulation (BMR), Dodd-Frank Wall Street Reform and Consumer Protection Act, European Market Infrastructure Regulation (EMIR). Basel 1, Basel II and Basel III.

Module 2. Foreign Exchange

• Distinguish the preferred base currency and the quoted currency in standard exchange rate notation in a currency pair.

• Identify the ISO codes for the currencies of the G20 countries.

• Distinguish between the big figures and the points/pips in a currency pair.

• Identify a bid/offer spot exchange rate as price-maker and as price-taker to calculate either a base or quoted currency amount

• Identify the best of several spot rates as the buyer or as the seller of an amount of base or quoted currency

• Understand and define the basic dealing terminology and characteristics of FX spot, FX outright forward, FX swap and forward-forward FX swaps.

• Calculate cross-rates from a given pair of exchange rates with all the possible combinations between base and common currencies.

• Calculate and explain the reciprocal rate of an exchange rate.

• Outline the mechanics and roles of benchmark fixings for Ex rates.

• Calculate a FX outright forward rate from a FX spot rate, interest rates and/or the forward points (and vice versa).

• Explain the relationship between the outright forward rate, the forward points, the spot rate and interest rates, including the concept of interest rate parity as well as the concept and possibility of covered interest arbitrage.

• Calculate forward cross-rates.

• Define forward value dates for standard periods and list those periods.

• Describe the structure and mechanics of an FX outright forward and of a FX swap, outline how a FX outright forward can be hedged with a FX spot transaction and money market transactions and outline how a FX swap can be used in place of money market transactions to hedge an FX outright forward and in creating synthetic foreign currency asset and/or liabilities.

• Explain the structure and mechanics of FX forward-forward swaps.

• Understand the concepts of historic rate rollovers and of early or late settlement in FX transactions.

• Outline the application of tom/next and overnight FX swaps in rolling over spot positions and hedging value tomorrow and value-torlay outright rates, and calculate a value-tomorrow rate from a spot rate and tom/next points, and a value-today rate from a spot rate, tom/next points and overnight points.

• Calculate broken-dated FX outright forward rates through linear interpolation.

• Understand the concepts of deliverable and non-deliverable currencies.

• Define a Non-Deliverable Forward (NDF), explain its rationale and describe the structure and the features of these instruments.

• Identify the commodities called precious metals (gold, silver, platinum and palladium) and give their ISO codes.

• Describe the conventional method of quoting gold in the international market in US dollars per ounce.

• Identify a bid/offer spot price as price-maker and as price-taker to calculate the value of a given weight of precious metals.

• .Distinguish between the spot, forward and derivative markets in precious metals.

• Outline the mechanics and role of the precious metals benchmark fixings.

Module 3. Rates

• Define the money markets and interest rate capital

• Describe the main features of the basic types of cash money market instrument in terms of whether or not they are transferable or secured, in which form they pay return (Le. discount, interest or yield); how they are quoted; internationally recognised minimum and maximum terms; and the typical borrowers/issuers and lenders/investors that use each type.

• Outline generally accepted terminology to describe the cashflows of each type of instrument and understand basic dealing terminology.

• Calculate present value and/or future value using the arithmetic techniques of discounting and/or compounding for a money market instrument terminated at maturity and/or for one that is rolled over at maturity

• Calculate simple interest rates using different day count and annual basis conventions, identify the international day count and annual basis conventions for the currencies of the G20 countries.

• Identify same-day, next-day, spot and forward value dates, and maturities under the following business day, modified following business day, preceding business day conventions and end/end rule.

• Identify the conventional frequency and timing of payments for cash money market instruments, including those with an original term to maturity of more than one year.

• Calculate broken dates and rates through linear (straight line) interpolation.

• Define interest rate indices, their methodologies and outline the most internationally used benchmark indices in the rates’ markets.

• Calculate interest rates and yields between the money market basis and bond basis in currencies for which there is a difference, and between annual and semi annual compounding frequencies.

• Calculate the value of a discount-paying money market instrument from its discount rate (straight discount) and calculate a discount rate directly into a true yield.

• Describe the various shapes of a yield curve and basic changes in its shape using market terminology and outline how the shape of the curve can be explained by theories and hypothesis (market segmentation, liquidity preference and expectations)

• Describe the main characteristics of bond instruments aš fixed-income securities and their roles in the function of interest money markets.

• Distinguish between and define what is meant by domestic, foreign and euro currency (offshore) money and bond markets and describe the principal advantages of euro money market instruments.

• Distinguish coupon bonds, zero coupon bonds, covered bonds, sukuk bonds, junk bonds, bond indentures, callable bonds, convertible bonds and floating rate bonds.

• Identify and outline the main characteristics of Islamic money market instruments (mudharabah and murabahah).

• Describe the differences and similarities of classic repos and sell/buy-backs in terms of their legal, economic and operational characteristics.

• Identify and outline the main types of custody arrangements in repo.

• Calculate the value of each type of instrument (except bond instruments) using quoted prices, including the secondary market value of transferable instruments.

• Calculate the present and future cashflows of a repo given the value of collateral and an agreed initial margin.

• Define haircuts and calculate the present and future cashflows of a repo given the value of the collateral and the usage of haircuts.

• Define general collateral (GC) and specials

• Describe and outline the main features of securities financing transactions (SFTS) using lending and borrowing of bonds or commodities, using margin lending and their main characteristics.

• Identify the collateral types and their role in SFTs.

• Understand the main characteristics and objectives of short selling strategies.

• Describe what happens in a repo and other SFTs when income is paid on collateral during the term of the transaction, in an event of default and in the event of a failure by one party to deliver collateral.

• Describe the mechanics and explain the terminology of a forward-forward loan or deposit, and the interest rate risk created by these instruments.

• Calculate a forward-forward rate from two mismatched cash rates and a cash rate from a series of forward-forward rates for consecutive periods.

Module 4. FICC Derivatives

• Describe the main concepts and product definitions of derivatives markets.

• Explain the objectives, risks and advantages in the utilisation of derivatives in financial markets, from trading to risk management.

• Define currency options, explain their terminology and distinguish these options with other currency derivatives and explain how they can be used to hedge currency risk.

• Describe the functions and characteristics of calls and puts, and how they can be combined in the creation of risk reversal (cylinders), straddle and strangle option products.

• Define strike price, market price, the underlying, premium, exercise type, exercise rights and expiry in currency options.

• Calculate the cash value of a premium quote in OTC currency options, describe how OTC and exchange traded currency options are quoted, and when a premium of an OTC currency option is conventionally paid.

• Describe the pay out profiles of long and short positions in calls and puts.

• Explain how FRASs, Interest Rate Swaps, Basis Swaps, Money Market Swaps and Money Market Futures are derivatives of forward-forward positions. and Money Market

• Explain how FRAS, Interest Rate Swaps, Money Market Swaps Futures can be used to hedge interest rate risk.

• Describe the mechanics and terminologies of FRAS, Basis Swaps, Money Market Futures and Interest Rate Swaps (including Overnight Indexed Swaps).

• Outline the contract specifications of the main Money Market Futures (Euribor, Eurodollar, Short Sterling, Euroswiss, Euroyen).

• Define collateral procedures in Money Market Futures such as initial margin, margin call and margin maintenance.

• Outline the principal differences between OTC instruments like FRAS and the Exchange-Traded instruments like Money Market Futures.

• Describe how a futures exchange and clearing house works.

• Explain how Money Market Futures can be used to hedge and price FRAS and Interest Rate Swaps.

• Calculate the settlement amount of FRIES at maturity against their benchmark index.

• Identify and distinguish the main Overnight Indexed Swaps (OIS) used in interest rate markets (CSTR, Fed Funds, Saron and Sonia).

• Define interest rate options, explain their terminology, distinguish these options with other interest rate derivatives and explain how they can also be used to hedge interest rate risk

• Explain the functions and characteristics of caps, floors and swaptions, and how caps and puts can be combined in the creation of collar option products.

• Define strike price, market price, the underlying, premium, exercise type and expiry in interest rate options

• Calculate the cash value of a premium quote in OTC interest rate options, describe how OTC interest rate options are quoted, and when a premium of an OTC interest rate option is conventionally paid.

• Describe the pay-out profiles of long and short positions in caps and floors.

• Define the intrinsic and time values of options and identify the main determinants of an option premium.

• Define delta, gamma, theta, rho and vega in options.

• Understand a delta number and outline what is meant by delta hedging.

• Explain what is meant by In-The-Money, Out-Or-The-Money or At-The-Money in options

• Explain the basic concepts of mark-to-market calculations for derivatives

Module 5. Financial Markets Applications

• Understand the main risk relevance characteristics of the Basel Accords.

• List and outline the main risk factors for: Market, Credit, Liquidity, Operational Legal, Regulatory and Reputational risk.

• Understand and be able to explain the following aspects of Market Risk

• Understand and be able to explain the following aspects of Credit Risk

• Understand and be able to explain the following aspects of Liquidity Risk

• Understand and be able to explain the following aspects of Operational Risk

• Understand and be able to explain the following aspects of Legal, Regulatory and Reputational Risk