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					              RETAIL OFF-EXCHANGE FOREX EXAMINATION


SERIES 34
The following is a general listing of the major subject areas covered by the examination and does not represent an ex-
haustive list of the actual test questions.


A.   Definitions and Terminology
     • American terms, European terms                                   • Market risk
     • Base currency, quote currency, terms currency,                   • Operational risk
       secondary currency                                               • Settlement risk, Herstaat risk
     • Bid/ask spread
     • Collateral, security deposit, margin
                                                                   D.    Forex Market - Concepts, Theories,
                                                                         Economic Factors and Indicators,
     • Counterparty, dealer: Futures Commission Merchant,
                                                                         Participants
       Retail Foreign Exchange Dealer, other regulated
                                                                        • Balance of payments
       entities listed in the Commodity Exchange Act
                                                                        • Balance of trade
     • Cross rates
                                                                        • Bank for International Settlements
     • Currency crosses
                                                                          (BIS)
     • Currency pairs
                                                                        • Capital account and current account
     • Direct quotes, indirect quotes
                                                                        • Central bank activities, intervention,
     • Exchange rate
                                                                        sterilized intervention
     • Exotic options: barrier, double barrier, knock in, knock
                                                                        • Clearing House Interbank Payment
       out, compound options
                                                                        System (CHIPS)
     • Forward points
                                                                        • Discount rate
     • Forward rate, bid forward rate
                                                                        • Economic indicators: employment,
     • Interest rate differential
                                                                        consumer spending, income, industrial
     • Interest rate parity
                                                                        and inflation indicators
     • Mark-ups, mark-downs
                                                                        • Elasticity of exchange rates
     • PIPs
                                                                        • Exchange rate intervention
     • Rollovers
                                                                        • Exchange rate volatility
     • Spot rate, spot price
                                                                        • Federal Reserve Board, Fedwire
     • Tom-next and spot-next
                                                                        • Fiscal policy
     • Trade date and settlement date
                                                                        • Fisher effect
     • Swaps
                                                                        • Foreign investment indicators
B.   Forex Trading Calculations                                         • Gross national product, gross
     • Cross rate transactions                                          domestic product
     • Effects of leverage calculations                                 • Inflation
     • Netting of positions                                             • Interbank funds transfer and
     • Open trade variation                                             settlement systems
     • Profit & loss calculations                                        • International Fisher effect
     • Pip values, price after pips                                     • International Monetary Fund
     • Option and exotic option profit & loss calculations               • Portfolio balance
     • Return on collateral, security deposit, margin                   • Role of central banks
     • Transaction costs                                                • Theory of elasticities
                                                                        • Theory of purchasing power parity
C.   Risks Associated with Forex Trading
                                                                        • World Trade Organization
     • Country or sovereign risk
     • Credit risk
     • Exchange rate risk
     • Interest rate risk
     • Liquidity risk
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Series 34 (continued)

              RETAIL OFF-EXCHANGE FOREX EXAMINATION


SERIES 34

E.   Forex Regulatory Requirements
     • CFTC final rules effective October 18, 2010
       - Close out of offsetting positions
       - Disclosure of profitable vs. non-profitable accounts
       - Prohibition of guarantees against loss
       - Registration requirements
       - Re-quoting
       - Security deposits
       - Specific authorization for trades
     • 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
       (pre and post October 18, 2010)
     • Security of customer funds, no segregation




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