Curriculum – National Institute of Securities Markets

I. Introduction to Commodity Markets
A. History of Commodity Trading
B. Spot and Derivatives Trading in Commodities
C. Major Commodities Traded in Derivatives Exchanges in India
D. Participants in Commodity Derivatives Markets
E. Commodities Trading vis-à-vis Trading in Other Financial Assets
F. Commodity Markets Ecosystem
G. Factors Impacting the Commodity Prices
H. Commodity Options and Index Futures

II. Commodity Futures
A. Introduction to Futures
B. Distinction between Forwards and Futures
C. Cost-of-Carry
D. Convergence of Spot and Futures Prices
E. Fair Value of a Futures Contract
F. Convenience Yield
G. Commodity Futures and Commodity Forwards
H. Pay-off Profile for Futures Contracts
I. Spot Price Polling and Final Settlement Price of Futures
J. Tick Size and its impact

III. Commodity Options
A. Introduction to Options
B. Option Terminology
C. Pay-off Profiles of Options Contracts
D. Determinants of Option Premium
E. Options on Commodity Futures
F. Options on Goods

IV. Commodity Indices
A. Commodity Index
B. Index Construction and its Constituents
C. Trading in Index Futures
D. Uses of Index Futures
E. What is an Index?
F. Trading in Index Options

V. Uses of Commodity Derivatives
A. Hedging
B. Long Hedge and Short Hedge Strategies Using Futures
C. Speculation
D. Arbitrage
E. Spread Trading
F. Basis
G. Option Trading Strategies
H. Hedging Strategies Disclosure Norms
I. Uses of Index Futures

VI. Trading Mechanism
A. Membership on Exchanges Having Commodity Derivatives Segment
B. Trading System in the Exchanges
C. Selection Criteria of Commodities for Trading on Derivatives Exchanges
D. Contract Specifications for Commodity Derivatives Contracts
E. Order Types and Conditions
F. Tracking Commodity Futures and Options Prices
G. Participants in Commodity Derivatives
H. Disclosures by Exchanges
I. Trading Costs to Participants in Commodity Derivatives

VII.Clearing Settlement and Risk Management of Commodity Derivatives
A. Clearing Corporation
B. Clearing and Settlement
C. Delivery Process
D. Entities Involved in the Clearing and Settlement Process
E. Premium/Discount
F. Penalty for Seller’s Delivery Default and Buyer’s Default
G. Deliveries in the Case of Physical Delivery
H. Risk Management for Exchange Traded Commodity Derivatives Markets
I. Position Limits and Computation of Open Position
J. Salient Features of Risk Containment Measures
K. Margining Mechanism
L. Additional Procedures for Other Market Segments
M. Raising of Bill for Delivery
N. Cyber Security & Cyber Resilience framework (CSCRF) for Stock Brokers / Depository Participants

VIII.Accounting and Taxation
A. Important Accounting Aspects related to Trading in Commodity Derivatives
B. Guidance Note Issued by ICAI on Accounting Treatment of Derivative Transactions
C. Accounting of Options Contracts
D. Important Tax Aspects Related to Trading in Commodity Derivatives

IX. Legal & Regulatory Environment of Commodity Derivatives
A. Regulatory Structure of Commodities Market
B. Securities Contracts (Regulation) Act, 1956
C. Securities and Exchange Board of India Act, 1992
D. Other Regulatory Norms to Encourage Commodity Derivatives

X. Code of Conduct and Investor Protection Measures
A. SEBI’s Code of Conduct for Brokers
B. Risk Disclosure to Client and KYC
C. Investors Grievance Redressal Mechanism
D. Rights and Obligations of Members and Clients
E. Additional Do’s and Don’ts for Clients / Investors in Commodity Derivatives