NISM Series 7 - Securities Operations & Risk Management (NISM VII / SORM) Exam

NISM Series 7 SORM

NISM-Series-VII: Securities Operations and Risk Management (SORM) Certification Examination

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Syllabus - NISM 7 Securities Operations and Risk Management

Unit 1: Introduction to the Securities Market

• Explain the Indian Securities Markets, highlighting its role in the Indian economy.
• Explain the primary and the secondary market, the different avenues for raising money from the public in the primary market, and the two mediums in the secondary market — the OTC and the Exchange traded market.
• Define Money Market and the key features of the money market products.
• Define the Equity market and its products such as equity shares, debentures, warrants, etc.
• Define the Derivative market and its products such as Index/Stock Futures.
• Explain Currency derivatives.
• Define the Debt market and its products such as the Government Securities Market and the Corporate Debt Market.

Unit 2: Market Participants in the Securities Market

• Know the different market participants in the Indian Securities Market.
• List the different types of Investors based on their investment objectives — retail investors, high net worth individuals, and Institutional Investors.
• Briefly introduce the Issuers who raise money from the securities market.
• Explain how money can be raised from international capital markets by way of GDRs, ADRs, FCCBs, and ECBs.
• Explain about the Intermediaries in the Indian Securities Market — define stock exchanges, their role in the market, discuss the Clearing Corporation/Agency and the role performed by them, define and discuss trading members, depositories, depository participants, and Custodians.
• Explain the regulatory framework for the securities market in India and the role of Securities and Exchange Board of India (SEBI).

Unit 3: Introduction to the Securities Broking Operations

• Explain the Trade Life Cycle and the steps and participants involved in a trade life cycle.
  • Explain how affirmation and confirmation for institutional clients are done.
  • Explain how custodial transactions are executed.
  • Define and explain Clearing and Settlement of executed trades.
• Understand the various Front Office Operations:
  • Client On-Boarding and Registration.
  • Role of sales in front office.
  • Process of opening a trading account and required documents.
  • Importance of KYC and definition of Unique Client Code.
• Discuss the Rights and Obligations (Member-Client Agreement).
• Know about the Risk Disclosure Document.
• Explain Order Management:
  • Types of orders and placing methods (internet/phone).
  • Order routing through the Exchange.
• Explain trade execution, order placement, and trade matching.
• Explain the various activities in a Middle Office in a securities broking firm including Risk Management and Surveillance mechanisms.
• List the various activities in Back Office Operations:
  • Trade Enrichment and Allocation.
  • Trade Confirmation/Modification.
  • Clearing and Settlement Process.
  • Accounting and broker account maintenance.
• Explain the role of Information Technology in a broking firm.
• Understand the different Regulatory Compliances a broker must follow.

Unit 4: Risk Management

• Discuss Risk Management in Cash Segment:
  • Understanding Margin, Value at Risk, Mark to Market & Extreme Loss.
  • Know about Liquid Assets, Liquidity Categorisation, and Mean Impact Cost.
  • Learn about Margining of Institutional Trades, Base Minimum Capital, Additional Margins, and Pre-trade Risk Controls.
• Discuss Risk Management Framework for F&O Segment:
  • Types of Margins — Initial, Exposure, Premium, and Assignment Margins.
  • Reporting, Disclosure, and Exposure Limits.
• Discuss Compliances and Regulatory Reporting:
  • Summarize regulatory compliance requirements.
  • Explain penalties for non-compliance and documentation lapses.
  • List mandatory books and periodic reporting timelines.
  • Explain client account statement practices and Risk-Based Supervision.
• Know about the Core Settlement Guarantee Fund — Corpus, Contribution, Default Waterfall, Stress Testing, and Back Testing.

Unit 5: Clearing Process

• Explain step-by-step the Clearing Process.
• Explain the Role of a Clearing Agency in the clearing process of a trade.
• Define Clearing Banks and explain their functions.
• Define and Explain Clearing Members/Custodians.
• Explain the role of Depository and Depository Participants.
• Differentiate the clearing process between equities and derivatives trading.
• Understand Determination of Obligation of Clients, Client Netting, and Broker Netting within the Exchange.

Unit 6: Settlement Process

• Understand the Settlement Cycle.
• Understand settlement procedures for Internet-based and telephonic trading.
• Understand Settlement of Funds:
  • Obligations to clients and custodians.
  • Margin Payments and Settlement Dues.
• Understand Settlement of Securities through depository clearing systems.
• Understand Corporate Actions and their Adjustments.
• Explain Auction of Securities — when and how auctions are carried out on BSE/NSE.

Unit 7: Investor Grievances and Arbitration

• Explain the importance of investors and grievance redressal mechanisms.
• Discuss the procedure followed to redress investor grievances.
• Learn about IPF / Customer Protection Fund (CPF) at Stock Exchanges.
• Understand arbitration and appellate arbitration procedures in exchanges.

Unit 8: Other Services Provided by Brokers

• Explain the various other services which a broker offers to investors.
• Understand IPO applications:
  • Treatment of IPO applications by brokers.
  • Procedure for collection of IPO forms.
  • ASBA facility.
• Explain how mutual fund units are traded on the exchange.
• Explain Portfolio Management Services offered by brokers.
• Explain the role of Research in a broking firm.
• Explain Depository Services provided by brokers.
• Explain the concept and importance of Margin Trading.