Question 1

A dealer has been asked by a broker to go to an exclusive club for the third time in a week. He should:
A) Agree. Entertainment is a normal part of business.
B) Refuse. This entertainment is excessive in value and frequency.
C) Agree but insist on paying halt the cost.
D) Refuse. Going back to the same club is clearly excessive entertainment.

Accepted Answer

Visiting an exclusive club three times in a week is excessive in both value and frequency, and may signal a conflict of interest or unethical behavior. As a result, it is best for the dealer to refuse the invitation.

Question 2

One or your brokers asks you to buy and sell EUP/USD at the same price net of brokerage in order to allow him to clear a transaction.
A) You must have prior senior management approval.
B) You must have the authority to switch names.
C) You must execute such transactions as promptly as possible within policy guidelines
D) All of the above.

Accepted Answer

All of the above statements are correct. Prior approval from senior management may be necessary for such transactions to ensure compliance with internal policies and regulations. The authority to switch names may be necessary if the broker's client is unable to complete the transaction themselves. And, execution of these transactions should follow policy guidelines and be done as promptly as possible to prevent any market disruption or manipulation.

Question 3

It is up to the vendors of electronic dealing platforms to ensure that dealers are trained to use their systems.
A) Management should ensure dealers fully understand the systems they use and dealers should read the manuals.
B) Management, dealers and vendors share responsibility.
C) Dealers are required to pass the ACI Dealing Certificate before being allowed to access electronic dealing platforms.
D) Given the wide range of electronic dealing platforms used by banks, it is the responsibility of the vendors to ensure individual users are adequately trained.

Accepted Answer

The answer of It is up to the vendors of...

Question 4

A person who appears to be a technician asks for your help in accessing treasury systems as he has forgotten his list of access codes. The Model Code recommends:
A) You should provide all reasonable assistance.
B) You should report the request immediately to senior management.
C) Do not get involved; you may be at risk.
D) There is no recommendation in the Model Code.

Accepted Answer

The request to access treasury systems without the proper access codes is suspicious behavior that must be reported immediately to senior management as it could potentially be a security threat. Providing access to such an individual without proper authorization could be a breach of security leading to disastrous consequences. Therefore, the best option is to report the request immediately to senior management.

Question 5

What is Model Codes recommendation on the settlement of dirrerences by "points"?
A) It is not favoured.
B) It may be permitted when allowed by the local market regulator.
C) Itis unconditionally accepted bythe Code.
D) It is allowed only if senior management approval is obtained.

Accepted Answer

The Model Code does not favor the settlement of differences by "points" as it may lead to disputes and lacks transparency.

Question 6

What are IMM dates?
A) The 10th of March, June, September and December.
B) The third Wednesdays of January, April, July and October.
C) The Mondays before the third Wednesdays of March, June, September and December.
D) The third Wednesdays of March, June, September and December.

Accepted Answer

IMM dates stand for International Money Market dates, which fall on the third Wednesdays of March, June, September and December. Therefore, option D is the correct choice.

Question 7

When a broker makes an error on payment instructions The Model Code recommends that
A) The broker remains liable for the resulting difference for 3 full business days following the date of the transaction.
B) The broker remains liable until the error is discovered.
C) The broker is not liable at all.
D) The broker's liability should be limited as he is not in a position to directly rectify the situation.

Accepted Answer

The answer of When a broker makes an error on...

Question 8

The use of off-market rates is discouraged and should be permitted only:
A) When the bank's income is secured on the trade.
B) If the unsecured credit is taken into account.
C) It the bank knows the customer very well.
D) When there are written procedures and policies for such transactions.

Accepted Answer

The use of off-market rates is discouraged, but if permitted, there should be written procedures and policies for such transactions to ensure proper oversight and risk management.

Question 9

Under the Model Code, it a broker shouts "done" or "mine" at the very moment a dealer shouts "off":
A) No deal is done.
B) The deal is done.
C) It should be resolved in consultation with senior management.
D) The central bank should be consulted.

Accepted Answer

The answer of Under the Model Code, it a broker...

Question 10

Dealers are allowed to trade for their own account if:
A) The dealers have good track records in their dealing both for the institution and for themselves.
B) There has been no previous conflicts of interest in the dealing room.
C) There is a clearly laFd down policy.
D) The dealers see no conflict of Interest in such dealing.

Accepted Answer

It is important to have a clearly laid down policy regarding dealers trading for their own account in order to prevent any conflicts of interest and ensure transparency in the dealing room. Even if dealers have a good track record and see no conflict of interest, a clear policy is necessary to ensure fair practices. The other options may be important factors to consider, but having a policy is essential.

Question 11

Which of the following is true?
A) It is the responsibility of the broking firm to conduct due diligence before transacting a deal.
B) All principals have the responsibility for assessing the creditworthiness of their counterparties or potential counterparties whether dealing direct or through a broking firm.
C) The principal is obliged to take into account any information provided by a broker as they are bound by a professional relationship.
D) All of the above.

Accepted Answer

All principals are responsible for assessing the creditworthiness of their counterparties, regardless of whether they are dealing directly or through a broking firm.

Question 12

Market participants should, where activity justifies it, aim to reduce settlement and related credit risk on currency transactions by:
A) Establishing realistic daylight limits for counterparties.
B) Monitoring all payments to counterparties who are known to be experiencing difficulties.
C) Establishing legally binding bilateral netting agreements with counterparties or participating in a multilateral netting system.
D) Seeking pre-payment.

Accepted Answer

Establishing legally binding bilateral netting agreements with counterparties or participating in a multilateral netting system reduces settlement risk by offsetting obligations between counterparties. This reduces the amount of currency that needs to be exchanged and therefore reduces the risk of one counterparty defaulting on its obligation. Establishing daylight limits for counterparties and monitoring payments to counterparties who are experiencing difficulties are also risk mitigation measures, but they don't address the root cause of settlement risk as effectively as netting agreements. Seeking pre-payment is not a standard practice in currency transactions and may not be feasible in all cases.

Question 13

The use of mobile phones from within the dealing room for transacting business:
A) Is not considered good practice.
B) Is accepted in case of direct deal input into the bank's system.
C) Is accepted for senior dealers.
D) Is accepted for hedging transactions.

Accepted Answer

The use of mobile phones from within the dealing room for transacting business is not considered good practice as it can create security risks and concerns regarding privacy and confidentiality of transactions. It is preferable to conduct transactions through the bank's authorized systems and platforms to ensure proper documentation, control, and compliance.

Question 14

A bank that has quoted a firm price is obliged to deal:
A) At that price.
B) At that price in a marketable amount.
C) At that price in a marketable amount with an acceptable name.
D) At that price in a marketable amount with an acceptable name and provided the market price has not moved excessively.

Accepted Answer

A bank is obliged to deal at a quoted firm price in a marketable amount with an acceptable name, ensuring the counterparty is creditworthy.

Question 15

What is a long straddle option strategy?
A) A long call option + long put option with the same strike prices
B) A short call option + short put option with the same strike prices
C) A long call option + short put option with the same strike prices
D) A short call option + long put option with the same strike prices

Accepted Answer

A long straddle option strategy involves buying both a call option and a put option with the same strike price and expiration date, giving the investor the potential for profit regardless of which way the underlying asset moves. This can be advantageous in volatile markets where it is uncertain which direction the asset will move. Option A is the only choice that matches this definition.

Question 16

A broker can consider a deal as done if:
A) He is confident that the dealer will not back out of the deal.
B) Both parties have established credit lines for each other.
C) One party acknowledges interest.
D) He receives verbal acknowledgement from the dealer.

Accepted Answer

A deal is considered done when there is a verbal acknowledgment from the dealer, indicating a mutual agreement has been reached.

Question 17

In the unforeseen event that a particular maturity date is declared a public holiday, what is normal market practice for spot FX?:
A) Extend the contract to the next business day
B) Shorten the contract to the previous business day
C) A new maturity date has to be agreed by the two parties involved
D) ACI's Committee for Professionalism decides on a case by case basis

Accepted Answer

The normal market practice for spot FX is to extend the contract to the next business day if a particular maturity date is declared a public holiday. This is done to ensure that both parties have sufficient time to settle the transaction.

Question 18

When a stop-loss/profit order is taken, the rate specified in the order:
A) Must be transacted regardless of where the market moved.
B) Must be transacted if a broker confirms that the rate specified was reached.
C) Cannot be taken as a fixed-price guarantee.
D) None of the above.

Accepted Answer

Stop-loss/profit orders are not guaranteed to be executed at the specified rate due to market volatility and slippage.

Question 19

What does the Model Code say about the responsibility of a broker in handling suspicious transactions?
A) Suspicious transactions should be reported by the principals.
B) Brokers need to make staff aware of the problem and exercise vigilance.
C) A broker should report any suspicions about a transaction to the other counterparty.
D) Brokers should advise clients to reject the name.

Accepted Answer

The Model Code states that brokers need to make staff aware of the problem and exercise vigilance when handling suspicious transactions. While brokers should report suspicions to appropriate authorities, reporting them to the other counterparty could compromise an ongoing investigation. The responsibility to report suspicious transactions lies with the principals, but brokers should also be proactive in identifying and preventing these transactions. Advising clients to reject a name is not sufficient action for handling a suspicious transaction.

Question 20

When using legal documentation proposed modifications:
A) Should be documented as soon as possible after a deal is done.
B) Should be clearly stated before a deal.
C) Can be agreed verbally.
D) Are not permissible.

Accepted Answer

Proposed modifications should be clearly stated before a deal in order to ensure that all parties involved are aware of the changes being made and can agree on them before proceeding. It is not recommended to rely on verbal agreements, as they can easily be disputed or forgotten. While it is possible to document modifications after a deal is done, it is much better practice to do so before the deal is finalized to avoid any potential confusion or legal disputes. Modifications that are not agreed upon by all parties involved would not be permissible.

Exam 2: ACI Dealing Certificate-Part B

A dealer has been asked by a broker to go to an exclusive club for the third time in a week. He should:

One or your brokers asks you to buy and sell EUP/USD at the same price net of brokerage in order to allow him to clear a transaction.

It is up to the vendors of electronic dealing platforms to ensure that dealers are trained to use their systems.

A person who appears to be a technician asks for your help in accessing treasury systems as he has forgotten his list of access codes. The Model Code recommends:

What is Model Codes recommendation on the settlement of dirrerences by "points"?

What are IMM dates?

When a broker makes an error on payment instructions The Model Code recommends that

The use of off-market rates is discouraged and should be permitted only:

Under the Model Code, it a broker shouts "done" or "mine" at the very moment a dealer shouts "off":

Dealers are allowed to trade for their own account if:

Which of the following is true?

Market participants should, where activity justifies it, aim to reduce settlement and related credit risk on currency transactions by:

The use of mobile phones from within the dealing room for transacting business:

A bank that has quoted a firm price is obliged to deal:

What is a long straddle option strategy?

A broker can consider a deal as done if:

In the unforeseen event that a particular maturity date is declared a public holiday, what is normal market practice for spot FX?:

When a stop-loss/profit order is taken, the rate specified in the order:

What does the Model Code say about the responsibility of a broker in handling suspicious transactions?

When using legal documentation proposed modifications: