NISM Series I: Currency Derivatives Certification Guide

Covers the structure of global and Indian forex markets, participants, exchange rate systems (fixed vs. floating), factors that drive currency movements, and the role of RBI in currency management. This chapter builds the conceptual foundation for everything that follows.

Contract specifications for USD/INR, EUR/INR, GBP/INR, and JPY/INR pairs. Pricing using cost-of-carry model, basis risk, convergence at expiry, margin requirements, and how importers/exporters use futures to hedge currency exposure.

Call and put option mechanics, payoff profiles for buyers and sellers, intrinsic value vs. time value, option Greeks (Delta, Gamma, Theta, Vega) in the context of currency options, and how to use options as a cheaper hedging alternative to futures.

Brief introduction to exchange-traded interest rate futures as they relate to currency markets, including how interest rate differentials affect forward rates and swap points.

Real-world applications: hedging for exporters and importers, speculation on directional currency moves, cross-hedging, and arbitrage opportunities between spot and futures markets.

Order types, trading hours, lot sizes, position limits, and the mechanics of placing and modifying trades on the NSE/BSE currency derivatives platform.

Role of clearing corporations (NSCCL), initial margin, mark-to-market settlement, delivery-based settlement on the final expiry day, and the risk management framework to protect market integrity.

SEBI regulations governing currency derivatives, FEMA guidelines, RBI circular compliance, position limit norms for retail participants and institutions, and reporting obligations.

Tax treatment of gains/losses on currency derivatives under the Income Tax Act, accounting entries for hedging vs. speculative positions, and GST applicability on brokerage.