Thursday, October 30, 2008

RETAIL OFF-EXCHANGE FOREX EXAMINATION

Overview of Series 34 Exam Questions

Series 34 – Retail Off-Exchange Forex Examination

The Series 34 exam is broken up into five main parts: definitions and terminology, forex trading calculations, risks associated with forex trading, forex market concepts and theories, and forex regulatory requirements.  Within these five main parts the exam is expected to cover many of the sub-parts listed below.  Please note that the following items are general and are not representative of actual test questions and do not necessarily represent the relative weighting of each of the categories.

Please check back with us soon for a Series 34 Study guide and Series 34 Flashcards.

Definitions and Terminology
•    American terms, European terms
•    Base currency, quote currency, terms currency, secondary currency
•    Bid/ask spread
•    Collateral, security deposit, margin
•    Counterparty, dealer: Futures Commission Merchant,  Retail Foreign Exchange Dealer, other regulated entities listed in the Commodity Exchange Act
•    Cross rates
•    Currency crosses
•    Currency pairs
•    Direct quotes, indirect quotes
•    Exchange rate
•    Exotic options: barrier, double barrier, knock in, knock  out, compound options
•    Forward points
•    Forward rate, bid forward rate
•    Interest rate differential
•    Interest rate parity
•    Mark-ups, mark-downs
•    PIPs
•    Rollovers
•    Spot rate, spot price
•    Tom-next and spot-next
•    Trade date and settlement date
•    Swaps

Forex Trading Calculations
•    Cross rate transactions
•    Effects of leverage calculations
•    Netting of positions
•    Open trade variation
•    Profi t & loss calculations
•    Pip values, price after pips
•    Option and exotic option profit & loss calculations
•    Return on collateral, security deposit, margin
•    Transaction costs

Risks Associated with Forex Trading
•    Country or sovereign risk
•    Credit risk
•    Exchange rate risk
•    Interest rate risk
•    Liquidity risk
•    Market risk
•    Operational risk
•    Settlement risk, Herstaat risk

Forex Market – Concepts, Theories, Economic Factors and Indicators, Participants
•    Balance of payments
•    Balance of trade
•    Bank for International Settlements (BIS)
•    Capital account and current account
•    Central bank activities, intervention, sterilized intervention, interference
•    Clearing House Interbank Payment  System (CHIPS)
•    Discount rate
•    Economic indicators: employment, consumer spending, income, industrial  and inflation indicators
•    Elasticity of exchange rates
•    Exchange rate intervention
•    Exchange rate volatility
•    Federal Reserve Board, Fedwire
•    Fiscal policy
•    Fisher effect
•    Foreign investment indicators
•    Gross national product, gross  domestic product
•    Inflation
•    Interbank funds transfer and  settlement systems
•    International Fisher effect
•    International Monetary Fund
•    Portfolio balance
•    Role of central banks
•    Theory of elasticities
•    Theory of purchasing power parity
•    World Trade Organization

Forex Regulatory Requirements
•    CFTC jurisdiction and jurisdictional limitations
•    Conflicts of interest
•    Disclosures to customers
•    Jurisdictional & regulatory framework
•    Know your customer
•    NFA Interpretive Notice Regarding Forex  Transactions
•    NFA Interpretive Notice      Compliance Rule 2-36(e): Supervision of the Use of Electronic Trading Systems
•    NFA Notice to Members: Supervision of Forex Promotional Materials
•    NFA membership and associate membership requirements
•    Promotional material & solicitation
•    Registration requirements
•    Reports to customers, confirmations, monthly  summaries
•    Security deposit rules
•    Security of customer funds, no segregation

http://www.nfa.futures.org/registration/SO-Series34.pdf