Circular No.1847

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Dr. R.H. Patil
Managing Director.
The National Stock Exchange of India Limited,
Mahindra Towers,
Worli, Bombay 400 018.

Dear Dr. Patil,

This is in reference to your application for recognition of the National Stock Exchange’s Certification in Financial Markets (NCFM) for derivative broker/dealers and salespersons submitted vide letter No.: NSE/F&O/6810 dated April 21, 1998. The Certification Committee set up by SEBI had considered the application and decided to grant recognition to the NCFM subject to fulfillment of the following conditions.

1. The curriculum of the NCFM should be in conformity with that as decided by the Committee. Any additional material that NSE may like to include in the certification programme would not carry any weightage in the overall assessment of the candidate.
2. NSE would conduct the examination in all cities where it has its regional centres, and subsequently it will expand its examination centers to provide wider access to the participants.
3. The Committee would inspect the question bank of the NCFM to satisfy itself about the quality and level of questions on a random basis.

The approval to NCFM is granted subject to your abiding by all directives issued by SEBI from time to time and the guidelines for conduct of certification examination as enclosed. The NSE may start certification for broker/dealers and salespersons in the derivative market on fulfillment of the conditions as laid down.
 
 

With regards,

Yours sincerely,
 
 
 

O.P. GAHROTRA
O.P. GAHROTRA
SENIOR EXECUTIVE DIRECTOR
 

encl: a/a

cc: Mr. Ashish Chauhan, Vice President.
National Stock Exchange India Limited.

GUIDELINES FOR CONDUCT OF CERTIFICATION EXAMINATION

1. Objective:



The examination should attempt to test the practical knowledge and skills required to operate in the derivatives market ensuring that the calibre of persons entering the market is kept high so that investors’ interests are best served.

2. Curriculum:

Any certification programme to be approved by SEBI should ensure that candidates have a basic knowledge of financial derivatives and an understanding of various Acts and Rules, Regulations and Byelaws of the Exchange. The certification programme should atleast cover the following:

• Characteristics of financial derivatives including futures and options.
• Principals of trading, hedging and investment strategies.
• Principles of clearing, margining, delivery and settlement and exercise.
• Risk management systems and procedures.
• Basics of Stock Index composition and calculation, including contract specifications.
• Existing regulatory and legal structure in the securities and futures market (including SCRA, SEBI Act, SEBI (Stock Broker and Sub-Broker) Regulations, 1992, Dr. L.C. Gupta Committee Report, Suggestive Byelaws and any other special regulatory requirements of the Derivatives market).
• Rules, Regulations and Byelaws of the Exchange (cash segment and derivatives segment).
• Broker-Client relationship (Rights and obligations).
• Accounting standards for derivatives.

1. Fully automated testing environment:



The administration of the test and its subsequent evaluation should be computerised. The test should be online computer based where the candidate is required to answer multiple choice questions and forward them electronically. In such an environment the candidate’s performance is also known instantaneously. Procedure for dispatch of Computerised test also avoid certain malpractices which may arise.

2. Nationwide access:



The test should be conducted in all regions of the country including all metros. The test should progressively be conducted in other cities to provide wider access to the participants.
 

3. Flexibility of test dates:



Test dates should be announced in advance and should be held atleast once every quarter. Candidates should be allowed to state their preference of date and test centre.

4. Random generation of questions and Degree of difficulty:



The certifying institute should have a rich database of questions which are randomly picked for each candidate taking the test. The questions may be graded on different levels of difficulty though uniformity should be maintained in selection of questions from each level for each candidate. Thus the level of difficulty of a particular test for a particular candidate should be the same as that for any other candidate.

5. Administrative monitoring:

The certifying institute should have adequate administrative capability to efficiently run the certification programme. Procedures for enquiries and registration for the certification test should be clearly laid down. The certificate to be issued to successful candidates should carry the photograph of the candidate. The examination should be undertaken on a "no profit" basis. The institution applying for recognition to SEBI shall mention the procedure it expects to follow for sending the candidate’s scores to prospective employers. At present the examination should be kept at a ‘Basic Entry Level’ and later with the development of