Last week and half, I was in Kuwait. It was a great experience conducting a training at Boursa Kuwait. We had a good blend of participants, senior people from product development, legal, operations and technology. We had very nice interactive session discussing how an Exchange would introduce a new product on their trading floor. Derivatives being complex products, it is much more than simply listing on exchange. Some of my friends asked some details of the course. I wanted to share the detailed contents of the course, also some sample material.
Sample material – Future Contract Life Cycle, Exchange Systems
Course Contents
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Introduction to Derivatives Market
Definition of derivatives contract; Difference between securities and derivatives; Financial Derivatives; Derivatives Market; Need and benefits of Derivatives; Dangers and risks of Derivatives; Challenges of managing derivatives; Role of IT
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Derivatives Market Players and Roles
Market Structure and Players; Role of each player – Buy-side, Sell-side, Exchange, Clearinghouse, Custodian, Servicing Firms, Trade Repositories, and Others
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Derivatives Products
Introduction to Derivatives Products; Terminology and Classification; Futures; Forwards; Options; Swaps; Equity Derivatives; Interest Rate Derivatives; FX Derivatives; Credit Derivatives; Commodity Derivatives; Comparison
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Equity Index Futures
Introduction to Securities – Stock, Bond; Market Index; Stock Market Index; Hedging Basics; Futures; Index Futures; E-mini S&P500 Contracts; Futures Settlement; Futures Pricing; Index Rolling
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Stock Options
Understanding Options; Applications of Options- Hedging, Speculation, other; Option products and markets; Stock Options – Trading, Pricing, Quotes, Settlement; Understanding CBOE Stock options; Margining Options; Option Trading Strategies; Options on Futures
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Market Data and Reference Data
Importance of market and reference data – FX rates, Interest rates, Credit data, Equity and equity index prices, Bond prices, Option and futures prices, Commodity prices, Credit spreads, Swap rates, other; Common Market Data Items; Common Reference Data Items and identifiers; Data Management Strategy and Operations
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Derivatives Contract Life Cycle
Define and distinguish the terms order, trade, contract, deal, and position; general characteristics of a derivatives contract; market-wide contract workflow; phases of a contract life cycle; various organizational units and their functions
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Collateral and Margin Management
Understanding Counterparty Risk; Collateral as a risk management tool; Collateral management standards and models; Margin model in listed and cleared derivative transactions; Collateral management model in OTC bilateral transactions; Importance of collateral optimization; Introduction to enterprise collateral management
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Futures Contract Life Cycle
Futures trading model; Life cycle of a futures contract; Timeline of a futures contract; Margining process of a futures contract; Delivery and settlement process; End-of-day operations
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Options Contract Life Cycle
Trading model of listed options; Life cycle of listed option contracts; Margining process of listed options; Understanding events – Termination, Exercise, Assignment, Delivery, Settlement
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Exchange and Clearinghouse Roles
Role of Exchange and Clearinghouse roles and responsibilities; Communication between two organizations
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Futures Exchange and Risk Management Tools
Introduction to CME Futures exchange; Trading on Globex; Globex Features; Globex Architecture; Market Integrity Controls; Risk Management Tools
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Exchange Systems
Functions of Exchange System; Architecture; Order Matching; Market Surveillance; Client Interface; Clearinghouse Interface; Clearinghouse Functions
