NISM Series XVI - Commodity Derivatives Certification Practice Exam

The Commodity Derivatives examination aims to establish a standardized minimum knowledge requirement for individuals serving as approved users and sales personnel of trading members within the commodity derivatives segment of a recognized stock exchange. This examination intends to provide a deeper comprehension of:

• The diverse derivatives products available in commodity derivatives markets.
• The regulations and associated risks linked with these products.
• The operational aspects of trading, clearing, and settlement within these markets.

Exam Learning Objectives

Upon successful completion of the Commodity Derivatives examination, candidates should be able to:

• Demonstrate familiarity with the fundamentals of Indian commodity derivatives markets.
• Understand various trading strategies applicable to commodity derivatives.
• Comprehend the processes of clearing, settlement, and risk management, along with the operational mechanisms within commodity derivatives markets.
• Have a grasp of the regulatory framework governing commodity derivatives markets in India.

Who should take the exam?

NISM Series XVI - Commodity Derivatives Certification Exam can be suitable for:

• Approved Users and Sales Personnel
• Students and Professionals

Exam Details

• Exam Name: NISM Series XVI - Commodity Derivatives
• Exam Languages: English
• Exam Questions: 100 Questions
• Time: 120 minutes
• Passing Score: 60%

Course Outline 

The Exam covers the given topics  - 

Topic 1: Overview of Commodity Markets

• History of Commodity Trading
• Spot and Derivatives Trading in Commodities
• Major Commodities Traded in Derivatives Exchanges in India
• Participants in Commodity Derivatives Markets
• Commodities Trading vis-à-vis Trading in Other Financial Assets
• Commodity Markets Ecosystem
• Factors Impacting the Commodity Prices
• Commodity Options and Index Futures

Topic 2: Understand Commodity Futures

• Introduction to Futures
• Distinction between Forwards and Futures
• Cost-of-Carry
• Convergence
• Fair Value of a Futures Contract
• Convenience Yield
• Commodity Futures and Commodity Forwards
• Pay-off Profile for Futures Contracts
• Spot Price Polling and Final Settlement Price of Futures

Topic 3: Commodity Options

• Introduction to Options
• Option Terminology
• Pay-off Profiles of Options Contracts
• Determinants of Option Premium
• Options on Commodity Futures
• Options on Goods

Topic 4: Learn about Commodity Indices

• Commodity Index
• Index Construction and its Constituents
• Trading in Index Futures
• Uses of Index Futures

Topic 5: Uses of Commodity Derivatives

• Hedging
• Long Hedge and Short Hedge Strategies Using Futures
• Speculation
• Arbitrage
• Spread Trading
• Basis
• Option Trading Strategies
• Hedging Strategies Disclosure Norms

Topic 6: Understand Trading Mechanism

• Membership on Exchanges Having Commodity Derivatives Segment
• Trading System in the Exchanges
• Selection Criteria of Commodities for Trading on Derivatives Exchanges
• Contract Specifications for Commodity Derivatives Contracts
• Profit/Loss per Contract for a Change of One Tick
• Order Types and Conditions
• Tracking Commodity Futures and Options Prices
• Participants in Commodity Derivatives
• Disclosures by Exchanges

Topic 7: Clearing Settlement and Risk Management of Commodity Derivatives

• Clearing Corporation
• Clearing and Settlement
• Delivery Process
• Entities Involved in the Clearing and Settlement Process
• Premium/Discount
• Penalty for Delivery Default
• Deliveries in the Case of Physical Delivery
• Risk Management for Exchange Traded Commodity Derivatives Markets
• Position Limits and Computation of Open Position
• Salient Features of Risk Containment Measures
• Margining Mechanism
• Additional Procedures for Other Market Segments
• Raising of Bill for Delivery

Topic 8: Accounting and Taxation

• Important Accounting Aspects related to Trading in Commodity Derivatives
• Guidance Note Issued by ICAI on Accounting Treatment of Derivative Transactions
• Accounting of Options Contracts
• Important Tax Aspects Related to Trading in Commodity Derivatives

Topic 9: Learn about Legal & Regulatory Environment of Commodity Derivatives

• Regulatory Structure of Commodities Market
• Securities Contracts (Regulation) Act, 1956
• Securities and Exchange Board of India Act, 1992
• Other Regulatory Norms to Encourage Commodity Derivatives
• SEBI’s Code of Conduct for Brokers
• Risk Disclosure to Client and KYC
• Investors Grievance Redressal Mechanism
• Rights and Obligations of Members and Clients
• Additional Do’s and Don’ts for Clients / Investors in Commodity Derivatives