| 1. Financial Markets Environment |
26% |
- Define foreign exchange markets, money markets, capital markets and commodities 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
- Explain the workflow and key functions of every phase of a financial markets’ transaction, from front office execution to management, exception reports, transaction confirmation, settlement (including events of missing and incorrect settlements) and reporting, distinguishing which steps are responsibility of the front, middle and back-office roles
- Understand the reasons for segregation of duties, authorisations and separate reporting lines in the various steps of a financial markets’ transaction, including trade generation and capture
- Explain the importance of Straight Through Processing (STP) related to timely processing, risk, cost and accuracy, as well as how STP is impacted
- Understand the usefulness of confirmations, explain the importance of checking and confirmation matching processes and describe the use of automation in the confirmations procedure
- Understand SWIFT and its main objective, describe the different types of messages and their usage
- Describe the different ways in which transaction information can be generated and how transaction information received from front office must be validated
- Understand the use of correspondent banks, nostro and vostro accounts
- Explain cut off times for payment with good value and/or short dates
- Define the different types of domestic and international payment systems
- Describe different types of settlements such as delivery versus payment, delivery versus delivery, delivery free of payment, netting, Continuous Linked Settlement (CLS) and financial vs physical settlement
- Outline the CLS system and parties involved
- Understand the use, functioning and advantages of bilateral and multilateral netting procedures
- Explain the mechanism of a booking system, of a processing system and of a reconciliation system
- Distinguish and identify mismatching records and figures (importance of timely identification)
- Understand how to control incoming and outgoing flows of cash and securities
- Calculate and agree brokerage, including the verification of discounts
- Identify the different processes to resolve an outstanding record of a transaction step by step, as well as the processes to resolve and close outstanding records of transactions
- Explain the different ways of financial communication related to transactions and transferring of transactions
- Explain position keeping and its importance to the processing of transactions
- 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 II (MiFID II, 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 I, Basel II and Basel III.
- Understand the key role of reporting financial markets’ transaction for regulatory compliance
- Understand how the quality and accuracy of data capture processes are important for regulatory compliance
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| 2. Foreign Exchange |
8% |
- Define the features and characteristics of foreign exchange instruments (FX spot, FX outright forward, FX swap and forward-forward FX swap) and explain their settlement processes
- Describe relevant responsibilities, transaction life cycle processes and controls for foreign exchange instruments
- Outline the characteristics of value today and value tomorrow outrights
- Understand the concepts of historic rate rollovers and of early or late settlement in FX transactions
- Calculate settlement / close out amounts correctly
- Outline the mechanics and roles of benchmark fixings for FX rates
- Understand the concepts of deliverable and non-deliverable currencies
- Define the features and characteristics of Non-Deliverable Forwards (NDF) and explain their settlement processes
- Define the features and characteristics of commodities called precious metals
- Describe relevant responsibilities, transaction life cycle processes and controls for precious metals instruments
- Distinguish the financial and physical delivery in precious metals’ markets
- Outline the mechanics and roles of benchmark fixings for precious metals
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| 3. Rates |
10% |
- Define the characteristics of the main instruments in money markets and interest rate capital markets
- Describe relevant responsibilities, transaction life cycle processes and controls for money markets and interest rate capital markets instruments
- Define interest rate benchmark indices, their methodologies and outline the most internationally used benchmark indices in the rates’ markets
- Explain the settlements process for the main money markets and interest rate capital markets instruments
- Calculate settlement and close out amounts for the main instruments in money markets and interest rate capital markets, as well as the related penalty fees
- Define the main characteristics of Islamic money market instruments (mudharabah and murabahah) and their settlement process
- Define the main characteristics of short-term securities instruments and their settlement process
- Describe relevant responsibilities, transaction life cycle processes and controls for short-term securities instruments
- Define the main characteristics of bond instruments
- Describe relevant responsibilities, transaction life cycle processes and controls for bond instruments
- Describe the main settlement procedures of bond instruments (at maturity, early settlement and default) and calculate settlement/close out amounts correctly
- Distinguish coupon bonds, zero coupon bonds, covered bonds, sukuk bonds, junk bonds, bond indentures, callable bonds, convertible bonds and floating rate bonds
- Understand the price / yield relationship in bond instruments
- Explain the securities issuing process by corporates
- Describe the reconciliation of securities held, the use of custodians as well as the delivery of securities
- Define the main characteristics of repos
- Describe relevant responsibilities, transaction life cycle processes and controls for repos
- Understand the use of repos in the liquidity management of a bank
- Define general collateral (GC) and specials
- Define haircuts and calculate the present and future cashflows of a repo given the value of the collateral and the usage of haircuts
- Define the main characteristics of Securities Financing Transactions (SFTs)
- Identify the collateral types and their role in SFTs
- Explain the importance of collateral management for bank liquidity
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| 4. FICC Derivatives |
10% |
- Distinguish the differences between Exchange-Traded and OTC Derivatives
- Explain the features and characteristics of Plain Vanilla Interest Rate Derivatives
- (FRAs, Interest Rate Swaps, Basis Swaps and Money Market Futures) and their settlement processes
- Calculate reset / fixing rates and margins for FRAs, Interest Rate Swaps, Basis Swaps and Money Market Futures
- Outline the contract specifications of the main Money Market Futures (Euribor, Eurodollar, Short Sterling, Euroswiss, Euroyen) and their settlement processes
- Define collateral procedures in Money Market Futures such as initial margin, margin call and margin maintenance
- Understand the correct reconciliation of financial futures positions and margin calls with the clearing agent
- Explain the features and characteristics of Interest Rate Options and their settlement processes
- Explain the features and characteristics of Currency Options and their settlement processes, including financial settlement and physical settlement
- Identify benchmark fixing rates and margins for Currency Options
- Explain the basic concepts of mark-to-market calculation for Derivatives
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| 5. Financial Markets Applications |
16% |
- Understand the main risk relevance characteristics of the Basel Accords
- Describe and outline the main risk factors for: Market, Credit, Operational, Legal, Regulatory and Reputational risk
- Understand and explain the following aspects of Market Risk:
- Counterparty, settlement and delivery risk
- Understand and explain the following aspects of Credit Risk:
- Categories, management and mitigation techniques
- Understand and explain the following aspects of Operational Risk:
- Systems, people, processes and external events
- Understand and explain the following aspects of Legal, Regulatory and Reputational Risk:
- Definition of Legal Risk
- Definition of Regulatory Risk
- Compliance and changes in legislation, ethical conduct and disclosure
- Definition of Reputational Risk
- Understand the main risk models
- Understand the dangers involved with third party payments and describe the controls that can minimise those risks
- Describe the Disaster Recovery (DR) and Business Continuity Plan (BCP) principles
- Describe the different types of static data and outline standing data files and tables
- Define the Standard Settlement Instructions (SSI) management (usage, maintenance and advantages)
- Understand the management of customer data within the different systems as well
- as the basic due diligence procedures to ensure the “Know Your Customer (KYC)” principles applicable to account opening
- Understand the need to maintain up to date recording of holiday and settlement files
- Describe the major types of documentation agreements for financial markets’ transactions
- Identify key documentation issues and common practices
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