Syllabus - ACI Operations Certificate

NEW SYLLABUS

ACI Operations Certificate

(Prometric Code: 3I0-013)

Examination delivered in

English and German

Introduction

A well-trained and efficiently organised Treasury Operations Department is

essential to complete every transaction. The Operations Department provides a

vital service to the Front-Office by ensuring that all funds flow in a timely and

correct manner and that all the necessary documentation is completed.

Taking into consideration the wider job function of the Operations Staff, this

examination has been designed to provide a benchmark for competency in all

aspects of the operations and settlement processes. It aims to test candidates’

knowledge of the underlying instruments involved in the international financial

markets, the processes for efficient settlements and related basic financial

calculations. Candidates should also be able to demonstrate appreciation of the

scope, importance and the role of the Operations Department, particularly in

ensuring an autonomous service to the Front-Office.

In particular, this programme is designed for:

• Recent entrants to the Operations Department (Back-Office);

• Other trading room support areas;

• Internal and external auditors;

• Compliance and risk officers;

• Product Control;

• Vendors.

In addition to the topics outlined below, candidates will be expected to be up-todate

with the latest developments that affect the Operations Department.

Syllabus - ACI Operations Certificate

1. Overall financial market and front to end treasury view

Overall Objective: To describe the roles of each participant within the financial

market and to provide an understanding of how Treasury Trading and Sales,

Middle-Office and Operations have to be structured in the risk management

context. To give an understanding of how the whole transaction process

management can be optimised as well as to explain the importance of providing a

quality, customer-orientated service to both internal and external clients.

At the end of this section, candidates will be able to:

• Describe the roles of dealers, brokers and operations officers.

• Understand the reasons for segregation of duties and separate reporting

lines.

• Depict the workflow of a transaction, encompassing all aspects of the

settlements ___process from deal capture through to management and

exception reports.

• Explain the importance of Straight Through Processing (STP) related to

timely ___processing, risk, cost and accuracy, as well as the possible ways to

improve STP.

• Explain the quality management measures necessary to ensure a high

quality ___customer-orientated service. ___

2. Deal capture, trade entry and confirmations

Overall Objective: To explain the payment and confirmation process that follows

deal capture and trade entry; list the problems that can arise if mistakes are made;

describe how different clearing and payment systems can impact on risk; show an

understanding of the correct source of trade information. ___

At the end of this section, candidates will be able to:

• Understand the usefulness of confirmations.

• Explain the importance of checking and confirmation matching processes.

• Describe the use of automation in the confirmations procedure.

• List the different types of SWIFT messages and their usage.

• State the different steps between deal entry and trade confirmation.

• Describe the different ways in which trade information can be generated.

• Be aware of how the segregation of duties should be applied in trade

generation and ___capture.

• Know how the trade information received from the Front-Office should be

validated.

Syllabus - ACI Operations Certificate

3. Settlement, netting and clearing

Overall Objective: To explain the importance of the different settlement and

payment systems as well as the use and handling of the correspondent network

and accounts.

At the end of this section, candidates will be able to:

• Understand the use of correspondent banks, nostro / vostro accounts.

• Explain cut off times for payment with good value or short dates.

• Define the different types of domestic and international payment systems.

• Describe different types of settlements such as delivery versus payment,

netting and Continuous Linked Settlement (CLS).

• Expand upon the CLS system and parties involved.

• Understand the use, functioning and advantages of bilateral and multilateral

netting procedures.

4. Reconciliations and investigations

Overall Objective: To explain the methodology used to match at least two

different records, using the same information to identify and investigate differences

and taking corrective action when necessary. To explain the way how to proceed to

settle outstanding items.

At the end of this section, candidates will be able to:

• Explain the mechanism of a reconciliation system.

• Detect mismatching figures (importance of timely identification).

• Interpret mismatching figures.

• Control incoming and outgoing flows.

• Calculate and agree brokerage, including the checking of discounts.

• Identify the different moves to resolve an outstanding item step by step.

• Resolve and close outstanding items.

___

Syllabus - ACI Operations Certificate

5. Treasury systems and data management

Overall Objective: To explain the essentials of a treasury system, the data

management for treasury operations as well as the basic accounting of treasury

operations.

At the end of this section, candidates will be able to:

• Explain the different ways of financial communication and transfer

transactions.

• Describe the different types of static data.

• Define the standard settlement instructions management (usage,

maintenance and ___advantages).

• Outline standing data files and tables.

• Understand the management of customer data within the different systems

as well ___as the basic procedures to ensure the “know your customer”

principles.

6. Risk management, controls, compliance, documentation

Overall Objective: To explain the importance of having strict procedures and

controls in place to ensure that no unauthorised or incorrect payments are made

and to protect the business from related risks. To describe the purpose of

documentation in settling financial transactions.

At the end of this section, candidates will be able to:

• Understand the dangers involved with third party payments and describe the

controls that can minimise those risks.

• Outline operational risk, and how it can arise.

• Explain settlement and delivery risk, and how they can be minimised.

• Understand the need to maintain up to date recording of holiday and

settlement ___files.

• List the due diligence procedures for account opening.

• Explain the relevant regulatory guidelines and recommendations for best

practice ___such as the Model Code.

• Describe the Disaster Recovery (DR) and Business Continuity Plan (BCP)

principles.

• Identify key documentation issues.

• List the major types of Agreements.

• Expand upon the different risks and have a general understanding of risk

models.

• Explain the importance of regulatory policies and compliance. ___

Syllabus - ACI Operations Certificate

7. Foreign exchange ___

At the end of this section, candidates will be able to:

• Define the features of foreign exchange instruments (spot, forward, swap).

• Define the features of Non-Deliverable Forwards (NDF).

• Explain the settlements process for foreign exchange instruments.

• Describe relevant responsibilities, cycle processes and incorporated controls.

• Outline the characteristics of value today and value tomorrow outrights.

• Calculate settlement / close out amounts correctly.

8. Money market

___

Overall Objective: To explain the characteristics of the major money market

instruments, specific responsibilities and associated settlement processes.

At the end of this section, candidates will be able to:

• Define the characteristics of the major money market instruments.

• Describe the trade life cycle and controls for money market instruments.

• Understand the main money market benchmark fixings.

• Explain the settlements process for the major money market instruments.

• Calculate settlement and close out amounts as well as the related penalty

fees.

• Define the characteristics of major short-term securities instruments.

• Appreciate the use of repos in the liquidity management of a bank.

• Describe the trade life cycle and controls for short-term securities

instruments.

9. Derivatives

Overall Objective: To explain the specific features of exchange-traded and Over

The Counter (OTC) derivative markets as well as the characteristics of optional and

non-optional derivatives, including the specific responsibilities and processes

associated with them.

At the end of this section, candidates will be able to:

• Recognise the differences between exchange-traded and OTC derivative

markets.

• Explain the characteristics of the plain vanilla derivative instruments (FRAs,

futures ___and swaps).

• Calculate reset / fixing rates and margins for plain vanilla derivative

instruments ___such as swaps, total return swaps, FRAs, IRS, CIRS and futures.

• Reconcile correctly financial futures positions and margin calls with the

clearing ___agent.

Syllabus - ACI Operations Certificate

10. Short-term bonds and notes

Overall Objective: To explain the characteristics of short-term debt instruments,

notes and bonds as well as the specific responsibilities and processes associated

with them.

At the end of this section, candidates will be able to:

• Define the features of the major short term fixed income securities such as

commercial paper, treasury notes and bonds.

• Outline bond market indicators and indexes.

• Distinguish coupon bonds from zero coupon bonds.

• Differentiate, within the corporate debt products, instruments such as junk

bonds, ___bond indentures, callable bonds, convertible bonds and floating rate

bonds.

• Describe the trading characteristics on exchanges, OTC, on secondary

markets as ___well as on third and fourth markets.

• Explain the securities issuing process by corporates.

• Outline the relevant responsibilities, cycle processes and incorporated

controls.

• Calculate settlement / close out amounts correctly; understand the price /

yield ___relationship.

• Describe the reconciliation of securities held, the use of custodians as well as

the ___delivery of securities.

• Explain the collateral management for bank liquidity.

11. Best Practices Operations

Overall Objective: To have a in-depth knowledge of the requirements of the

Model Code as to Best Practices Operations with an emphasis on professionalism

and integrity as well as on the main aspects of Operations such as confirmations,

settlements, reconciliations and control mechanisms.

At the end of this section, candidates will be able to:

• Understand efficiency and accuracy as the two most important aspects of the

operational process.

• Apprehend and explain the confirmation process.

• Define and describe the features of settlement, netting and standard

settlement instructions (SSIs).

• Understand the importance of Performance and Capacity Management in FX.

• Differentiate “prime brokerage” and “non-prime brokerage” trades and

explain their matching.

• Describe the settlement trough CCP and CLS

• Define “de minimis” claims.

• Comprehend and calculate compensation claims, back value and use of

funds (UOF) requests and explain the respective calculation methodologies.

• Expand upon “broken trades” and off-market rate deals.

Syllabus - ACI Operations Certificate

• Understand the Industry Best Practice for general setup, controls as well as

business contingency planning (BCP) and explain the segregation of duties.

• Describe Best Practices with regards to Electronic Trading, its participants

and counterparts as well as its processes.

Syllabus - ACI Operations Certificate

Examination Procedure

Format: The examination lasts 2 hours and consists of 85 multiple-choice

questions. Some questions might require the use of a basic calculator. The latter

will be provided on screen.

The overall pass level is 50% (43 correct answers), assuming that the minimum

score criteria for each of the topic baskets is met.

The minimum score criteria is 50% for the Best Practices Operations topic

basket and 40% for each of the other topic baskets.

Topic basket Number of

questions

Minimum of

correct answers

Minimum score

level

1 Overall financial market and

front to end treasury view 5 2 40%

2 Deal capture, trade entry and

confirmations 10 4 40%

3 Settlement, netting and clearing 10 4 40%

4 Reconciliations and

investigations 10 4 40%

5 Treasury systems and data

management 5 2 40%

6 Risk management, controls,

compliance and documentation 10 4 40%

7 Foreign exchange 5 2 40%

8 Money market 5 2 40%

9 Derivatives 10 4 40%

10 Short term bonds and notes 5 2 40%

11 Best practices operations 10 5 50%

Total 85

Grades

Pass 50,00% - 64,99%

Merit 65,00% - 74,99%

Distinction 75,00% and higher

Examination Fee

EUR 250,00 all taxes included.

Syllabus - ACI Operations Certificate

ACI OPERATIONS CERTIFICATE

Reading List and Internet Links

General

• Mastering Treasury Office Operations written by Denis Nolan and

Gordon Amos. CHAPTERS 1-7: ISBN 0 273 635794 Publisher - Pearson

Education (£90.00). www.pearsoned.co.uk

• Treasury Operations Handbook written by Philip J L Parker ACIB, ISBN

978-1-4461-9450-8. Publisher www.lulu.com 2010 (£35.00) available from

www.lywood-david.co.uk/mmtw4.htm

• Back Office and Operational Risk written by Mervyn J. King. Published

2010 by Harriman House Publishing. ___ISBN 9781906659363. (£45.50)

www.harriman-house.com

• The ACI Model Code, published by ACI – The Financial Markets

Association. Copies can be downloaded from www.aciforex.com

• FSA Handbook FSA Central Bank Authority FSA Handbook online version

available at: www.fsa.gov.uk/handbook

• Payment systems For CHIPS available at:

http://www.chips.org/reference/docs_rules/000721.pdf

• CLS Best Practice Contact: http://www.cls-services.com

• NIPS Code available at:

http://www.bankofengland.co.uk/markets/forex/fxjsc/nipscode.pdf

• ICMA The Global Master Repurchase Agreement (GMRA) is available at:

http://www.icmagroup.com/resources/icma-documentation/

• ISDA

http://www.isda.org/publications/pubguide.aspx Some documentation

may only be available to members/subscribers

Basic understanding of accounts

• Mastering Treasury Office Operations written by Denis Nolan and

Gordon Amos. 159 ff in: ___ISBN 0 273 635794 Publisher - Pearson Education

(£90.00). www.pearsoned.co.uk

Syllabus - ACI Operations Certificate

Repos

• Mastering Repo Markets written by Robert Steiner ISBN10: 0273625896

ISBN13: 9780273625896

The only book covering these markets in this way, Mastering Repo Markets

contains worked examples and exercises throughout, practice drills which

reflect the style of the ACI exams, plus a complete practice examination

paper.

Derivatives

• Mastering Derivatives Markets A Step-by-Step Guide to the Products,

Applications and Risks. 4th Edition. By Francesca Taylor. Dec 2010,

Paperback, 432 pages (£50.00). ISBN13: 9780273735670; ISBN10:

0273735675 www.pearsoned.co.uk