NISM Series-XII: Securities Markets Foundation Exam

The NISM-Series-XII: Securities Markets Foundation Certification Exam is designed for entry-level professionals having an interest in creating a career in the securities markets area.

Target Audience

The NISM Series-XII: Securities Markets Foundation Exam is suitable for all individuals having a basic knowledge of the Indian Securities markets. Some of the intended roles for this exam include:

• Firstly, entry-level professionals in the securities markets
• Secondly, employees of intermediaries functioning in the securities industry
• Thirdly, professionals in other industries interested in gaining knowledge of the securities markets
• Lastly, students, homemakers, and teachers

Further, the purpose of this exam is to provide the basic knowledge of the Indian securities markets to the participants and related rules and regulations.

Skills Enhancement

Candidates on successfully completing the NISM Series-XII Securities Markets Foundation Certification Examination will:

• Firstly, know and understand the basics of the Indian Securities Markets.
• Secondly, understand the various processes involved in Primary and Secondary Markets
• Thirdly, know the schemes and products in Mutual Funds and Derivatives Markets in India.
• Lastly, understand the steps in the financial planning process.

NISM Exam Details

NISM Series-XII: Securities Markets Foundation Exam consists of 100 multiple-choice questions of 1 mark each adding to 100 marks. And, the time given to complete the exam is 120 minutes. However, there shall be a negative marking of 25% of the marks assigned to the NISM Series-XII: Securities Markets Foundation Questions for each wrong answer. In order to pass the exam, it is required to score 60 marks. Lastly, this NISM exam will cost Rs. 1770+ (+ refers to Payment gateway charges extra). And, the NISM Series-XII: Securities Markets Foundation certification is valid for three years.

Exam Registration

For NISM Series-XII: Securities Markets Foundation Exam registration, click on the “Register” tab. After that, fill up the Online Registration Form available on the NISM Online Certification System. However, the registered candidates can log in by using the Email address and Password. After logging in, you can access the following:

• Firstly, you can check the status of Seat Availability as well as schedule a Test / Enroll Online.
• Secondly, you can complete the payment using a credit card or debit card.
• Next, after enrolling, there you can download Admit Card and go through the Study Material
• Lastly, you can access Exam Results and Verify Skills

Exam Course Structure

For NISM Series-XII: Securities Markets Foundation Exam there are six units that NISM provides to help you in exam preparation. These units contain sections and subsections.

Unit 1: Understanding Securities Markets and Performance

1.1. Understand the role of securities markets

• Understand how securities markets facilitate allocation of capital from supply side to demand side

1.2. Understand the meaning of securities and securities markets

• List the key functions of securities markets participants

1.3. Describe the structure of securities markets and role of its participants

• Firstly, Investors (Individual/ Institutional)
• Secondly, Issuers (Corporate/ Government/ Local/ Municipal)
• Thirdly, Intermediaries
• Lastly, Regulators (SEBI/ RBI/ MCA/ MoF/ IBBI/ IRDAI)

1.4. List the various technological advancements brought in securities market and explain its criticality (Cyber-security/ Cyber resilience/ Sandboxes etc)

Unit 2: Securities – Types, Features and Concepts relating to asset allocation and investing

2.1. List out different securities available in the securities market

• Equity
• Debt
• Hybrid
• Commodities
• Derivatives
• Mutual Funds
• Structured Products
• Distressed Securities

2.2. Understand the factors that influence the choice between equity and debt capital for issuers

2.3. Know the characteristics and role of equities

• Firstly, explain the features of equity capital
• Secondly, list the types of equity capital with distinct features (Preference shares/ Differential Voting Rights)
• Lastly, explain the risk and return from investing in equity

2.4. Know the characteristics and role of debt securities

• Explain the basic features of a debt instrument
• List the types and structures of debt instruments
• Distinguish between various types, tenors, and structures of debt instruments
• Explain the classification of debt market instrument
  • Firstly, describe various types of money market instruments and their features
  • Secondly, explain government securities and their features
  • Lastly, describe corporate bonds and debentures and their features
• Understand the benefits and risks of investing in debt securities

2.5. Describe the factors that influence the choice between equity and debt for investors

2.6. Know the types and features of hybrid securities

• Convertible debentures
• Depository Receipts (IDR, GDR and ADR)
• Foreign Currency Convertible Bonds (FCCB)
• Warrants

2.7. Know the characteristics and role of commodities

2.8. Know the characteristics and role of derivatives

• Explain features of equity derivatives
• Explain the features of commodity derivatives
• Describe the features of interest rate derivatives
• Explain the features of currency derivatives

2.9. Explain the concepts and benefits of asset allocation process and diversification

2.10.Understand various underlying factors while investing

• Managing risk and return requirements
• Aligning investment horizon to a selection of investment products/ asset class
• Aligning portfolio features to investor’s needs
• Ease of investments and exits
• Flexibility in investments
• Availability of information and updates

2.11. Describe the various aspects of investing in equity

• Understand the concepts and differences between price and intrinsic value

2.12. Describe the equity investing process

• Define and describe the commonly used terms in equity investing with appropriate illustrations
  • Price Earning Multiple (PE multiple)
  • Price to Book Value (PBV)
  • Dividend Yield
• Explain the importance of equity research and its role in the evaluation of equities
• Describe the concepts and elements of equity analysis and valuation
  • Understand the fundamental and technical analysis
  • Understand the Discounted Cash Flow and Relative Valuation models

2.13. Understand the concepts and terms relating to debt securities with appropriate illustrations

• Time Value of money
• Yield and Price
• Yield to maturity (YTM)

2.14. Describe in brief the debt investing process

Unit 3: Primary Markets

3.1. Understand the nature and functions of the primary market

• Define primary markets
  • Firstly, primary markets for equities
  • Secondly, primary markets for debt (Corporate/ G-secs)
  • Lastly, primary markets for other securities (Depository Receipts/ Warrants)
• List and describe the functions of the primary markets

3.2. List the different intermediaries in Primary Market for both equity and debt (MB/ RTA/ Underwriter/ Bankers/ SCSB/ Depository/ BRLM/ PD …)

3.3. Discuss various types of issues in primary markets (Public issue, Private Placement, Preferential issue, Rights & Bonus issues)

3.4. List the categories of issuers in the primary markets

3.5. List the types of investors in the primary markets

3.6. Discuss the IPO framework for primary markets

• List the key regulations for public issue of shares
  • Eligibility criteria
  • Promoters’ Contribution
  • Minimum offer to public
  • Period of subscription
  • Underwriting
  • Dematerialization of shares
  • Credit ration of IPOs

3.7. Describe the types of public issues of equity shares

• Define and differentiate initial public offer (IPO) and follow on public offer
• Define and differentiate fresh issue of equity shares and offer for sale

3.8. Describe the pricing process in a public issue of shares

• Fixed price issue
• Book built issue

3.9. Describe the public issue process of equities

• List the constituents in a public issue and their roles

3.10. Define and list the features of a prospectus

3.11. Describe the process of applying to a public issue

• Explain the basis of allotment
• Discuss the role of Green shoe option

3.12. Understand the process and importance of listing of public issues

3.13. Describe the rights issues in equity

3.14. Understand the regulatory requirements in public issue of debt securities

• Eligibility criteria
• Base issue size
• Offer document and Shelf prospectus
• Listing of securities
• Credit rating
• Minimum subscription
• Dematerialization
• Debenture Trustees
• Debenture redemption reserves
• Creation of security
• Coupon rate

3.15. Describe the public issue process of debt

3.16. Describe private placements in equity and debt

• Qualified Institutions Placement (QIP)
• Electronic system for debt book building

Unit 4: Secondary Markets

4.1. Describe the role and list the functions of the secondary markets

4.2. List the types of secondary markets available for different securities

• Firstly, Secondary market for equities (stock exchanges)
• Secondly, Secondary market for debt securities (CCIL/ OTC/ Stock Exchanges)
• Lastly, Secondary market for commodities (mandis)

4.3. Understand the market infrastructure institutions (MIIs) and describe the functions of the market participants

• Stock exchanges and their members
• Investors
• Intermediaries involved in trading, clearing and settlement processes
• Depositories and Depository Participants
• Clearing Corporation
• Regulator
• MII Governance norms

4.4. Describe the role of stock brokers and authorized persons and explain the process for client acquisition

• Understand the Client acquisition process by a trading member
• Understand the purpose of a 3-in-1 account
• Discuss the role and importance of Power of Attorney

4.5. Understand the trade execution process and explain related concepts

• Electronic Trading system
  • Algo trading and Co-location
  • Internet based trading
  • Mobile Trading
• Orders and their types
• Trade and order execution
  • Price Time Priority
  • Active and Passive orders
• Block deals and Bulk deals
• Explain the concept and role of circuit breakers
• Contract note
• Cost of trading (user charges/ statutory charges/ bid-ask spread)

4.6. Understand the clearing and settlement process of a trade

• Explain the concepts of delivery and squaring off
• Determine settlement obligation
• Understand the concepts of settlement cycle, pay-in and pay-out
• Explain the importance and types of margin requirements
• Describe concepts of short delivery and short payment
• Understand the impact of Corporate actions on settlement process
• Discuss in brief the advantage of Interoperability of Clearing Corporations

4.7. Understand Trading & Settlement process from investors’ point of view (online trading platform/ mobile trading etc)

• Explain Securities Lending and Borrowing Mechanism (SLBM) and its role

4.8. Understand and interpret market information

• Market size and activity/ liquidity aspect (impact cost)
• Reading market prices
• Disclosures by listed companies

4.9. Understanding the margining and risk management systems for secondary markets

• Firstly, Capital adequacy norms
• Then, Margins and Cross-margining
• Lastly, Settlement Guarantee Fund (SGF)/ Investors services fund

4.10. List the rights, obligations and grievance redressal mechanism for investors in secondary markets

• Discuss briefly the importance of Investor Protection Fund (IPF)

4.11. Secondary market trading & reporting of debt instruments

Unit 5: Mutual Funds

5.1. Define and explain the concept of mutual fund (an alternate channel of investing into debt and equity)

• Explain the basic features of a mutual fund
• Understand various features of mutual fund products

5.2. Describe key terms and concepts associated with mutual funds

• Types and categories of Mutual fund schemes
• Know about units and unit capital
• Then, explain the concepts of Mark to market (MTM)and Net Asset Value (NAV)
• After that, know about Fund running expenses (FRE) and Loads
• Compare and contrast Open-end, Closed-end and Interval funds
• Lastly, explain the importance of mutual fund being a pass through entity

5.3. Define and List the types of open-ended mutual fund products

• Equity schemes
• Debt schemes
• Hybrid schemes
• Solution oriented schemes
• Other schemes

5.4. Define and List the types of close-ended mutual fund products

• Fixed Maturity Plans (FMP)
• Infrastructure Debt Funds (IDF)
• Real Estate Mutual Funds (REMF)

5.5. Explain the types of investing in mutual funds

• Active investing
• Passive investing (ETF/ Index funds)

5.6. Describe the modes and processes associated with investing in mutual funds

• Firstly, Online investment and Offline investment modes
• Permanent Account Number (PAN) and Know Your Customer (KYC) process including FATCA and CRS compliance (eKYC)
• Then, Purchases: New Fund Offer (NFO) and Continuous offer, Offer Document/ KIM/ Fund Factsheet
• Redemptions
• After that, Non-financial transactions
• Statement of Account (SoA) and Consolidated Account Statement (CAS)
• Lastly, Distributor commissions

5.7. Understand how systematic transactions are conducted and their uses

• Firstly, Systematic Investment Plan
• Secondly, Systematic Withdrawal Plan
• Thirdly, Systematic Transfer Plan
• Lastly, Switches

5.8. Know the regulatory framework for mutual funds

• Features of Mutual Fund Regulation

5.9. Investor Service Standards

Unit 6: Derivative Markets

6.1. Define derivative products

• Explain the role of derivatives in risk management and support with real life illustrations
• Describe how a derivative product is structured (pay-off structuring)

6.2. Describe various concepts and features associated with derivatives

• Firstly, Zero Sum Game
• Secondly, Settlement Mechanism
• After that, OTC and Exchange Traded Derivatives
• Lastly, Arbitrage

6.3. List the types of derivative products and discuss their features

• Firstly, Forwards
• Secondly, Futures
• Then, Options
• Lastly, Swaps

6.4. Describe the structure of derivative markets and list out the derivative products available for trading

6.5. Understand how derivative contracts are traded and settled – Futures & Options

• Discuss the contract specifications
• Discuss the trading and settlement process

6.6. Describe the risk management system in derivative markets and its regulatory requirements

• Firstly, understand Base Minimum Capital and Liquid Net-worth requirements including cash and non-cash collateral
• Then, understand the purpose and types of margins required
• Lastly, understand how position limits are calculated

6.7. Understand the application of derivatives products in risk management and support with real life examples

• Describe briefly about hedging, speculation and arbitrage
• Describe the costs and benefits of derivatives

6.8. Understand the key market indicators in derivative markets

• Describe Open Interest
• Describe Put Call Ratio (PCR)

For More: Check NISM Series-XII: Securities Markets Foundation Exam FAQs

NISM Exam Policies

NISM provides certification exam policies to help candidates in understanding of the exam procedures and after-exam rules. Some of them include:

Refund Policy

The NISM refund policy states that fees once paid through the payment gateway cannot be refunded. But, for other reasons, this can be done if there is numerously debiting from a Candidate Card/Bank Account due to technical error. Or payment gets deducted from the Candidate Card/Bank Account but the enrolment for the examination is unsuccessful.

Special Accommodation Policy

To get the special accommodation for the NISM Certification Exam, candidates have to inform NISM and send the form to NISM at least 30 days in advance. After that, the approval for Special Accommodation will be provided to the candidate by NISM after assessing its requirements.

Re-schedulement Policy

Candidates can reschedule an enrolled exam by directly logging into the NISM Certification Portal. But, this must be done at least 15 days prior to the exam date, subject to the availability of examination dates and exam slots.

Study Guide: NISM Series-XII: Securities Markets Foundation Exam

This Ultimate Study Guide covers all the NISM Series-XII Securities Markets Foundation Certification Examination Study Material to help you ac your preparations. Lets get started.

Understanding Exam Objectives

Exam objectives help in providing the list of topics to start the exam preparation. These topics further are divided into sections and subsections, which makes it easier for candidates to start according to their preferred concepts area. Before starting preparing for the exam, it is important to go through this guide to understand the knowledge requirement and other major details for the exam. However, for NISM Series-XII: Securities Markets Foundation Exam the topics include:

• Firstly, understanding Securities Markets and Performance
  Secondly, Securities:
  • Types
  • Features
  • Concepts relating to asset allocation and investing
• Thirdly, primary markets
• Next, secondary markets
• After that, mutual funds
• Lastly, derivative markets

NISM Training

NISM offers various training programs for securities market candidates including that regulators that have a main focus on policy creation and implementation. These training programs help securities professionals to stay up to date with the latest market legal framework, products, processes, and technologies. Moreover, the training programs have various formats such as classroom lectures, workshops, role-playing, and interaction with experts.

NISM Series-XII: Securities Markets Foundation Books

NISM provides a workbook to assist candidates in preparing for the National Institute of Securities Markets (NISM) Certification Exam for Securities Markets Foundation. We know that NISM-Series-XII: Securities Markets Foundation Certification Exam is for entry-level professionals having an interest in creating a career in the securities markets. Related to this, this book will cover all important topics for providing basic knowledge of the Indian securities markets to the candidates and the related rules and regulations.

Joining Online Study Groups

Joining online groups or communities during the preparation for an exam can be really beneficial. That is to say, in these study groups, you can discuss any of your queries and get the best possible answer. Moreover, there are professionals and experts in these groups that will keep you up to date with the latest happenings for the NISM Series-XII: Securities Markets Foundation Exam.

Start Using Practice Tests

Practice tests give an advantage to candidates preparing for NISM Series-XII: Securities Markets Foundation Exam. Moreover, NISM Series-XII: Securities Markets Foundation Sample Questions help you to have the best possible revision, and taking sample tests for the NISM Exam, will help in learning and understanding the pattern of the questions so that you don’t face any problem during the exam. Boost your confidence with Free NISM Series-XII: Securities Markets Foundation Practice Test now!

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