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Mastering the NISM Series 8 Equity Derivatives Certification: A Complete Guide

The NISM-Series-VIII: Equity Derivatives Certification Examination is a critical certification for professionals involved in India’s equity derivatives market. Not only does it open doors to new career opportunities, but it also establishes a strong foundation in equity derivatives and their regulations.

This comprehensive guide will help you navigate the certification, covering key exam objectives, topics, structure, and preparation tips to ensure you’re ready to excel.

Understanding NISM Series 8 Equity Derivatives Certification

The NISM Series 8 Equity Derivatives Certification is designed to set a minimum knowledge standard for sales personnel, trading members, and individuals aspiring to work in the equity derivatives market. This certification exam, often called the NISM Series 8 or NISM 8 certification, tests your understanding of various equity derivative products, regulatory frameworks, risk management principles, and trading strategies in India’s securities markets.

Exam Objectives for NISM Series 8 Equity Derivatives:

On passing the exam, candidates should:

  1. Understand the basics of the Indian equity derivatives market.
  2. Learn to develop trading strategies using futures and options.
  3. Master the operational mechanisms, including clearing, settlement, and risk management.
  4. Be aware of the regulatory and legal frameworks that govern equity derivatives in India.

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Why Take the NISM Series 8 Equity Derivatives Certification?

Professionals working in equity derivatives and related financial roles benefit significantly from earning the NISM Series 8 certification, which signals to employers that the candidate possesses essential knowledge for operating in this highly regulated field. Additionally, students and finance enthusiasts aiming for a career in stock trading or financial analysis find this certification particularly valuable for skill development.

Exam Structure and Key Topics for NISM Series 8 Equity Derivatives

The NISM Series 8 Equity Derivatives exam is a two-hour test consisting of 100 questions, each worth one mark. There is a penalty of 25% negative marking per incorrect answer, with a required passing score of 60%.

Here’s a breakdown of the exam syllabus with topic weights to help you prioritize:

Chapter-wise Topics and Weightage in NISM Series 8 Equity Derivatives

The exam covers ten chapters, each focusing on distinct aspects of equity derivatives, from basic concepts to trading mechanisms and regulatory compliance. Here’s a breakdown of the syllabus with weightage:

Chapter-wise Topics and Weightage in NISM Series 8 Equity Derivatives

  1. Basics of Derivatives (10%):
    • Introduction to derivatives, market participants, and various types of risks.
  2. Understanding Index (5%):
    • Concept of indices, construction of equity indices, and their applications.
  3. Introduction to Forwards and Futures (20%):
    • Overview of forward and futures contracts, contract specifications, payoff structures, and more.
  4. Introduction to Options (20%):
    • Basic understanding of options, option pricing, payoff diagrams, and option Greeks.
  5. Strategies Using Equity Futures and Options (10%):
    • Hedging, trading strategies, Put-Call Parity, Delta-hedging, and synthetic options.
  6. Trading Mechanism (10%):
    • Market timings, order types, brokerage, trading costs, and algorithmic trading.
  7. Clearing, Settlement, and Risk Management (10%):
    • Settlement processes, margin requirements, and risk management strategies.
  8. Legal and Regulatory Environment (5%):
    • Key legal frameworks and the role of SEBI in derivatives.
  9. Accounting and Taxation (5%):
    • Accounting treatment and taxation of derivatives.
  10. Codes of Conduct and Investor Protection Measures (5%):
    • Client risk profiling, investor grievance mechanisms, and AML compliance.

NISM Series 8 Equity Derivatives Certificaiton Examination Syllabus Outlines with Chapter-wise marks weightage.

Analysis of Series VIII Equity Derivatives Exam Weightage

Chapter 3 and Chapter 4, focusing on Forwards, Futures, and Options, comprise 40% of the total score, underscoring their significance in the examination.
Chapters 1, 5, 6, and 7 collectively cover another 40%, focusing on essential trading knowledge, strategies, and operational mechanisms. Chapters 8-10, while covering only 15% in total, are vital for understanding legal, regulatory, and ethical standards, essential for compliant market operations.

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Test Details for NISM Series 8 Equity Derivatives

  • Module Name: NISM-Series-VIII: Equity Derivatives Certification
  • Fees: ₹1500 (additional payment gateway charges apply)
  • Duration: 120 minutes
  • Question Count: 100
  • Passing Marks: 60%
  • Negative Marking: 0.25 for each incorrect answer
  • Certificate Validity: 3 years

    • In-Depth Overview of the NISM Series 8 Equity Derivatives Syllabus

    Chapter 1: Basics of Derivatives

    1.1 Define the term ‘Derivatives’
    1.2 Know brief history of financial derivatives and list the factors influencing the growth of derivatives markets globally
    1.3 Know the history of derivatives in India and state the derivative products traded in India
    1.4 List different types of market participants and their roles
    1.5 Differentiate between OTC and exchange traded markets
    1.6 Explain the importance of derivatives
    1.7 List various risks faced by the participants in derivatives markets

    Chapter 2: Understanding Index

    2.1 Explain the term ‘Index’
    2.2 Understand the economic purpose of index
    2.3 Discuss various types of Indices and their computation
    2.4 List important attributes for construction of an Index and understand the concept of ‘impact cost’
    2.5 Understand how index is constructed, maintained and revised
    2.6 List some of the major equity indices in India
    2.7 Understand various applications of indices

    Chapter 3: Introduction to Equity Futures and Forwards

    3.1 Explain the term Forward contract, list essential features and major drawbacks of forward contracts
    3.2 Explain the term Futures contract, list salient features and limitations of Futures contract
    3.3 Discuss the contract specification of Exchange Traded Equity Futures
    3.4 Understand the key terminology associated with futures contracts
    3.5 Compare the advantages and disadvantages of forwards and futures
    3.6 Illustrate payoffs for Futures and draw payoff charts for Long and Short Futures
    3.7 Explain the Cost-of-carry model and Expectations model for futures pricing
    3.8 Understand the concept of convergence of cash and futures prices
    3.9 Describe uses/applications of equity futures

    Chapter 4: Introduction to Equity Options

    4.1 Explain the term option contract and understand the options terminology
    4.2 Discuss the contract specifications of Exchange Traded Equity Options contracts
    4.3 Understand the concept of Moneyness of an option and define ITM, ATM and OTM
    4.4 Describe the intrinsic value and time value of Options
    4.5 Explain the payoff diagrams of call and put options for the buyer and writer of these options
    4.6 Differentiate between futures and options contracts in terms of rights and obligations of buyers and sellers
    4.7 List the determinants of option price, know the impact of these factors on the value of calls and puts and understand option greeks
    4.8 Outline the commonly used models for options pricing
    4.9 Understand the concept of implied volatility and its importance
    4.10 Analyse the profitability of call and put options of different strikes from the perspectives of buyer and seller of these options

    Chapter 5: Strategies using Equity Futures and Equity Options

    5.1 Discuss different strategies for hedging, trading and arbitrage using equity futures
    5.2 Understand various option trading strategies for hedging, trading and arbitrage purposes
    5.3 Describe the principle of Put-Call Parity and Synthetic Option Strategies
    5.4 Explain Delta-hedging with suitable examples
    5.5 Discuss how information from Open Interest, Volume, futures price and Put-Call ratio is used for formulating trading strategies

    Chapter 6: Trading Mechanism

    6.1 Know the entities involved in the trading in equity derivatives exchanges, know the market timing of derivatives market and outline the corporate hierarchy of trading system. Explain Order Management and understand various types of orders that can be entered in the trading system and the conditions that can be attached to the orders.
    6.2 Explain the eligibility criteria of stocks for derivatives trading
    6.3 Describe the criteria for selection of an index for derivatives trading
    6.4 Understand the adjustments made to derivatives contracts for various corporate actions
    6.5 Know various trading costs such as Brokerage, Exchange transaction charges, SEBI turnover fee, other costs like Stamp duty, GST, STT, etc.
    6.6 Briefly introduce the algorithmic trading
    6.7 Know sources to track the futures and options data

    Chapter 7: Clearing, Settlement, and Risk Management

    7.1 Understand the clearing and settlement mechanisms
    7.2 Know various entities involved in clearing and settlement process and their roles
    7.3 Understand the clearing mechanism and calculate open positions and obligations of clearing members under various situations
    7.4 Understand the responsibilities of a clearing corporation and discuss the Interoperability among clearing corporations
    7.5 Understand settlement Mechanism, Daily Settlement Price and Final Settlement Price
    7.6 Calculate MTM settlement and final settlement of equity derivatives under various situations and understand the Settlement of funds and securities
    7.7 Know the salient features of the exchange risk management measures which includes Regulatory guidelines on open positions and know the penalties for violations
    7.8 Understand margining and mark to market (MTM) and know the effects of non-payment of margin. Discuss margin collection processes of clearing corporations, understand the importance of client margin reporting and the new framework for verification of upfront margin collection from clients (including the segregation and monitoring of collateral at client level).
    7.9 Briefly discuss about Settlement Guarantee Fund (SGF) and Investor Protection Fund (IPF)

    Chapter 8: Legal and Regulatory Environment
    8.1 Know important provisions of Securities Contract (Regulation) Act, 1956 and know the definition of securities and derivatives under this act
    8.2 Define the role of SEBI in regulating exchange traded equity derivatives market
    8.3 List important rules and regulations pertaining to trading in equity derivatives market
    8.4 Know important rules and regulations related to clearing, settlement and risk management
    8.5 Know the eligibility criteria for membership on derivative segment

    Chapter 9: Accounting and Taxation
    9.1 Explain accounting treatment of futures and options contracts
    9.2 Understand the taxation of derivative transactions and describe the applicability of STT on derivatives contracts

    Chapter 10: Codes of Conduct and Investor Protection Measures
    10.1 Discuss the importance of understanding the risk profile of the clients
    10.2 Understand the importance of the risk disclosure to client, KYC and Suspicious Transaction Reporting (STR)
    10.3 Briefly discuss the anti-money laundering procedures
    10.4 Understand the investor grievance redressal mechanism

    Tips to Excel in the NISM Series 8 Equity Derivatives Exam

  • Study Key Topics Thoroughly: Pay special attention to topics with higher weightage, such as forwards and futures, options, and trading strategies. Focus on understanding key concepts rather than memorizing facts.
  • Use Official NISM Study Material: The official NISM workbook covers everything you need for the exam. It provides sample questions and case studies that are valuable for understanding the format and difficulty level.
  • Practice Numerical Problems: The exam includes numerical questions, especially in the sections on pricing models and settlement calculations. Practice these well in advance.
  • Take Mock Tests: NISM Mock exams help you get comfortable with the format and timing. Aim to complete nism free practice tests within the given time limit and review your answers.
  • Understand the Regulatory Framework: Chapters on the regulatory environment and codes of conduct are critical for understanding the legal side of equity derivatives. Focus on the roles of SEBI and other regulatory bodies.

    • How to Register for the NISM Series 8 Equity Derivatives Exam

    To register, visit NISM’s official certification portal (https://certifications.nism.ac.in). After registration, choose a preferred test center, date, and time. Payment can be made online, and the certification costs ₹1500.

    Upon successful completion, you’ll receive a certificate valid for three years. You’ll need to provide a valid PAN card during registration to obtain this certification.

    FAQs on NISM Series 8 Equity Derivatives Exam

    1. Who Should Take the NISM Series 8 Equity Derivatives Certification?

    This certification is ideal for:

    • Trading members and approved users in equity derivatives.
    • Professionals looking to work in derivatives markets.
    • Students interested in finance and derivatives.

    2. What is the assessment structure?

    The examination will be of 100 marks, will have 100 questions, and should be completed in 2 hours. There will be negative marking of 25% of the marks assigned to a question. The passing score for the examination is 60%.

    3. Can I Appear for the Exam Online?

    The exam is conducted at designated test centers across India. Check NISM’s website for available centers and slots.

    4. Is Study Material Provided?

    Yes, after enrollment, you will receive a soft copy of the equity derivatives study material. Printed materials are also available for purchase through Amazon Website.

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    5. How Long Is the Certificate Valid?

    The certificate is valid for three years, after which you can renew it by appearing for a Continuing Professional Education (CPE) session or retaking the exam.

    6. Where do I get sample questions for the Certification Examination? How can I appear for a mock test?

    Candidates may refer to the chapter-end sample questions and the worked-out examples/ illustrations provided in the workbook.
    To appear for a nism free mock test, you can enroll nism series 8 free mock test.

    7. How do I renew my certificate?

    To renew your current certificate, you need to appear for NISM CPE for Equity Derivatives or successfully pass the NISM Equity Derivatives Certification Examination before the expiry of such certificate. Please note certificates beyond their validity period cannot be renewed.

    7. What is the fee structure?

    The fees for “NISM-Series-VIII: Equity Derivatives Certification Examination” is Rupees One Thousand Five Hundred only (Rs. 1500/-).

    Download Latest NISM Series 8 Equity Derivatives Certification Exam Study Material

    To excel in the NISM Series 8 Equity Derivatives Certification Exam, it is essential to have the latest study materials that thoroughly cover exam topics, from basic derivatives to complex trading strategies. The NISM provides official study resources, including a comprehensive workbook covering syllabus areas like trading mechanisms, regulatory guidelines, and more. You can download the latest NISM latest study material directly from the official NISM website after registration.

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    Note: After enrolling, candidates receive access to study materials in PDF format. These include sample questions, practice exercises, and a detailed outline of key exam concepts. If you prefer printed resources, Taxmann Publications also offers hard copies of NISM study books. You can purchase it through Amazon.

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    Mock Test for Series 8 Exam Preparation

    Mock tests are an excellent way to solidify your preparation for the NISM Series 8 Equity Derivatives Certification Exam. To help candidates practice thoroughly, nism series 8 free mock tests are available, including:

    • 100 questions per mock test.
    • Unlimited attempts for maximum practice.
    • Lifetime access on any device.
    • Downloadable PDF for offline preparation.
    You can download nism equity derivatives free mock tests to simulate real exam conditions and identify areas for improvement. For those seeking more in-depth preparation, BFSI Courses Academy offers paid mock tests with over 700+ questions and detailed explanations. Key benefits of this package include:
    • Real-time analysis to track progress and performance.
    • Unlimited attempts for repeated practice.
    • 270-day access to study at your pace.
    • Affordable pricing for comprehensive test preparation.
    With consistent practice, these resources will help you gain confidence and increase your chances of passing the NISM Series 8 Equity Derivatives Certification Exam on the first attempt.

    Important points to remember:
    • Please note that the Test Centre workstations are equipped with either Microsoft Excel or OpenOffice Calc or libreoffice. Therefore, candidates are advised to be well versed with these application software for computation of numericals.

    Preparing for a Rewarding Career in Equity Derivatives

    Earning the NISM Series 8 Equity Derivatives Certification sets you on a path toward a fulfilling career in equity trading, analysis, and financial markets. With in-depth knowledge of derivatives, trading strategies, and regulatory guidelines, you’ll be well-equipped to navigate the complexities of the Indian stock market. Embrace this certification as a stepping stone to professional growth in equity derivatives.

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