3I0-013 ACI Operations Certificate challenging Questions and Answers

To cancel an initial payment order and to process a new one with a higher amount

To suspend a payment order until the balance becomes positive again

To adjust the amount of fees to be paid

To change the value date of a payment order

Expect a credit statement on your JPY nostro account on the near date

Be required to obtain and execute the ICMA Master Agreement to document the transaction

Need to instruct your USD nostro bank to pay out USD on the far date

Anticipate no movement of principal, but a cash settlement on the far date

The Federation of Bankers Associations

The International Foreign Exchange Market Practices Committee

The G7 Committee of Central Banks

ACI - The Financial Markets Association

GBP 98,750.00

GBP 100,000.00

GBP 99,688.36

GBP 99,684.03

Continuous Linked Settlement

Cash Linked Settlement

Credit Linked Securities

Counterparty Limit System

It contains all weekends and bank holidays for all currencies held in the currency file

It contains Saturdays, Sundays and domestic bank holidays

It contains a list of deals maturing on a domestic bank holiday

It contains a list of all deals where the maturity date is a weekend

Consumption and inflation levels

Money market rates and government bonds

Mortgage rates

Commodities

Is higher than its face value if, and only if, its coupon rate is higher than its yield to maturity on the coupon date

Is higher than its face value if, and only if, its coupon rate is lower than its yield to maturity on the coupon date

Is lower than its face value if, and only if, its coupon rate is higher than its yield to maturity on the coupon date

Is always higher than its face value

Are commonly used to register off-balance sheet movements

Are used to book internal tax related items

Generally mirror the nostro statements

Are reserved for audit and compliance purposes only

ACT/360

ACT/ACT

360/360

ACT/365

30/360

ACT/365

ACT/ACT

ACT/360

NZD 5,000,000.00

NZD 5,076,205.48

NZD 5,076,250.00

NZD 5,075,000.00

Account reconciliations are necessary for the early detection of missing, failed or erroneous entries.

Custody accounts should be reconciled after each account movement or at least once a month.

Reconciliations related to transactions and balances should only be conducted for cash accounts.

Cash accounts should be reconciled as soon as an updated account statement is available.

A future rate agreement involving two different currencies

An interest rate agreement where buyer and seller will exchange an interest rate differential at a given date in the future

An interest rate to be applied to a loan or deposit that begins and matures in the future

An agreement to exchange cash flows starting on a specific date in the future

Always paid in case of an early redemption

Paid, if stipulated in the prospectus, at an early redemption

Always paid at final maturity

Only paid if a bond is redeemed after its initially scheduled maturity

EUR 620.83

EUR 868.06

EUR 968.06

EUR 2,183.33

GBP 2,509,166.67

GBP 2,509,041.10

GBP 2,509,016.39

GBP 2,520,000.00

Derivatives brokers significantly over-charged their clients

Institutions did not understand the leverage of their transactions

Money managers engaged in intra-day trading

Money managers embezzled money using derivatives

a 270-day tenor

a 360-day tenor

a 365-day tenor

a 366-day tenor

Never remunerated

Remunerated at the EONIA rate

Remunerated at the rate of the deposit facility

Remunerated at the main refinancing rate

It helps the risk manager to adjust the limits

It allows the cash positions keeper to retrace the arrival of the funds

It is essential in determining compensation arrangements at a later date

The auditors require these logs for their statistics

Refuse, input the deal as normal but keep the request to yourself

Input the deal the following morning as requested by the Chief FX trader

Refuse, input the deal and tell another spot trader

Refuse, input the deal and report the incident to your superior

It should be based on the days’ past settlement date, value and/or likely compensation

It should be based on the BIC-address and country

It should be based on bilateral limits

It should be based on the relationships of the institutions involved

NOK 10,240,799.00

NOK 240,798.61

NOK 10,237,500.00

NOK 10,240,798.61

The following Monday

Saturday

The last business day of the month

The first business day of the following month

Bond warrants

Reverse convertibles

Zero coupons

Mini-Max (collared) FRN

As an exchange rate

As a cash flow

As a margin added to the floating rate

As an interest rate expressed in percentage terms

No special requirements need to be considered

The receiver has to approve the transfer

Interest has to be paid to the receiver

The receiver is required to accept the payment amount

17:00 (5.00 p.m.) Central European Time (CET)

18:00 (6.00 p.m.) Central European Time (CET)

18:30 (6.30 p.m.) Central European Time (CET)

18:30 (6.30 p.m.) CET, but on the last minimum reserve fulfillment day (23rd of a month) 19:30 (7.30 p.m.) CET

Confirmation of the exact processing time of the payment order with the central bank of your counterparty

The strict adherence to the cut-off times of your domestic payment system

Confirmation of the time of processing of the payment order with your own central bank

The strict adherence to the cut-off times for payments made worldwide

Wait until the counterparty contacts you to before deciding what to do

Immediately contact the counterparty to find the most appropriate way to have the funds returned as quickly as possible to minimize the loss of value days

Ask the counterparty to keep the money and to place (invest) it at a special rate

Ask your accounting department to book the amount as a loss

You will pay a cash settlement to the counterparty

You will receive the cash settlement

There is no cash settlement pending

There is insufficient information to make a determination

Currency risk

Operational risk

Liquidity risk

Settlement risk

It allows the compliance officer to see how often the reconciliation staff has claimed for an outstanding item

It allows management to see what items are pending by value and counterparty, but also how long items have been outstanding and whether there is an improvement in the pace of reconciliations.

It allows reconciliation staff to check the bilateral limits with counterparties and to adjust these limits as necessary

Because the most recent figures have to be published in the balance report

Bears a risk limited to the premium paid

Bears a substantial risk

Bears a risk limited to the premium received

Bears no risk

89 days

90 days

91 days

92 days

3 months, 6 months and 9 months

1 month only

Up to 2 years

1 month, 3 months, 6 months and 12 months

8 September

10 September

8 December

10 December

The futures exchange itself

The clearing house of the futures exchange

Your broker

The ISDA

By a SWIFT MT 320

By a SWIFT MT 330

By a SWIFT MT 340

By a SWIFT MT 360

CHAPS

TARGET 2

EAF

FX-NET

Receive JPY 105,263.16

Pay JPY 950,000,000

Receive JPY 950,000,000

Pay JPY 105,263

It is only permissible in derivatives markets

Both parties of a trade should send confirmations

It is recommended

It is only permissible when dealing value today

An agreement to exchange one stream of interest payments for another (fixed against floating)

A fixed rate leg in one currency and a fixed rate leg in another currency

Two floating rate legs on different indexes

An agreement to borrow and lend one currency for another at two different value dates

If EURIBOR is higher than 0.75%

If EURIBOR is lower than 0.75%

If LIBOR is lower than 0.75%

If LIBOR is higher than 0.75%

A collateral agreement eliminates the future replacement risk

A collateral agreement can reduce market risk

A collateral agreement can reduce operational risk

A collateral agreement can reduce the replacement risk

The price of the underlying instrument at the time of the transaction

The price at which the transaction on the underlying instrument will be carried out if the option is exercised

The price the buyer of the option pays to the seller when entering into the options trade

The price at which the two counterparties can closeout their position

The FX spot and forward dealing input and processing module

Standard back office features

The money market dealing and processing module

The securities trading and processing module

To ensure efficient cash management

To ensure that ail receipts of foreign currency are made in a timely fashion

To reduce the amounts paid in interest rate claims due to late payments

To ensure that expected cash movements agree with the actual movements of currency

Auction markets conducted by the U.S. Treasury for U.S. Treasury bills

The repo market

The foreign exchange market

The over-the-counter market for U.S. Government Bonds

The flat ECB marginal lending facility rate

The ECB marginal lending facility rate plus 25 b.p.

The average of each day’s EONIA rate minus 25 b.p.

The average of each day’s EONIA rate plus 25 b.p. unless that is higher than the ECB marginal lending facility rate

The maintenance margin is a predetermined fraction of initial margin

The initial margin is a predetermined fraction of maintenance margin

The maintenance margin represents the brokerage costs

The maintenance margin represents management fees

When a trade has been agreed to with dates (maturities) different from the standard dates

When one of the parties to the deal unilaterally decides to withdraw from the on-going transaction

When, due to a system break, one or both parties to the deal chooses to withdraw from the ongoing transaction

When, due to a system break, one or both parties to the deal are unclear as to whether the deal has been done

Is an agent who mediates between buyers and sellers, for their mutual financial interest

Controls country limits in cooperation with the compliance officer

Is responsible for reducing transaction fees

Acts as a correspondent bank

A FX Swap

A repurchase agreement

An interest rate swap (IRS)

A dual swaption

A request for financial institution transfer

A general financial institution transfer

A financial institution transfer for its own account

A notice to receive

He should give his opinion.

He should give his opinion and tell the counterparty that he is not qualified to do so.

He should tell the counterparty that he is not qualified to give an opinion and refer the counterparty to another dealer.

He should give his opinion and refer the counterparty to another dealer.

The original face value of the CD

More than the originally paid value

Less than the originally paid value

There is too little information to decide

Physical delivery

Collateral management

Negotiation of fees

Settlement

At the discretion of the issuer and after the launch

Only with the consent of the note holders

Always in the case of default payment

Only by the custodian with the consent of the issuer

A purchase of a cap and a sale of a cap at higher reference rate

A purchase of a floor and a sale of a cap or vice versa

A purchase of a cap and a purchase of a floor

A purchase of a step-up cap and a sale of a step-down floor

The real-time gross settlement (RTGS) system owned and operated by the Eurosystem

The system used in Germany for settling high value domestic securities transactions

The pan-Europe netting system used for reducing credit risk for derivative transactions

The system used by the European Banking Federation to clear cross border Euro payments

Liquid assets pledged by one or both counterparties to the other to reduce credit risk

Deposits placed by a commercial bank with a central bank to fulfill reserve asset ratios

Any deposit placed by an institution with another institution of a lower credit rating

Any cross border payment of currency

Spot FX

Repo

Forward FX

FRAs

The duplicate receipt of funds from a counterparty

The non-payment of funds to a counterparty

The duplicate payment of funds to a counterparty

The non-receipt of funds from a counterparty

SWIFT

CHAPS

Euro Link System (ELS)

TARGET2

No action is required. The credit interest earned on the credit balance will offset the debit interest incurred on the short balance

You should borrow USD 5,000,000.00 to cover the short balance and leave the long balance as it is

You should lend the surplus USD 5,000,000.00 in order to compensate the overdraft charges on the short balance with the interest earned on the loan

You should instruct the bank with the long balance to transfer USD 5,000,000.00 to your nostro account at the other bank

Monday, 13 March

Tuesday, 14 March

Wednesday, 15 March

Thursday, 16 March

It must be processed once a year

Brokers’ bills should be reconciled during the night when no other system is running

Brokers’ bills must be reconciled promptly at month-end prior to payment

The existence of a single reference currency for all the brokers with whom your institution is dealing

It refers to an electronic settlement between Euroclear and Clearstream

It is an electronic settlement between Western Union and Clearcom

It refers to the relationship between two correspondent banks

It designates the exchange of payment orders between a nostro and a vostro account

A dealer does not need to confirm payment details by phone

It splits differences arising from failed settlements between the two counterparties

It eliminates the need to send out SWIFT payment authorizations on a case-by-case basis

It avoids having to confirm each deal separately

Accounting

Adjustment of bilateral limits

Netting

Nostro reconciliation

International Swaps and Derivatives Association

Integrated System Data Association

International Swap Derivatives Agreement

International Swaps Dealer Association

The financial reporting standard

Brokerage accounting

The custodian account reconciliation function

The country limit overview

The difference between the current price of an asset and its previous close

A statistical measure of price fluctuations as an annualized percentage

The measure of the liquidity of a contract or security

The difference between the annual high and low of a security

MT 3XX

MT 2XX

MT 5XX

MT 1XX

1. Basic header block, 2. Communication header block, 3. Currency block, 4. Text block, 5. Trailers block

1. Basic header block, 2. Application header block, 3. User header block (optional), 4. Text block, 5. Trailers block

1. Sending header block, 2. Application header block, 3. User header block, 4. Text block (optional), 5. Transmission block

1. Basic header block, 2. System header blocks (optional), 3. User header block, 4. Text block, 5. Security block

Front office staff should not be able to modify confirmations.

The staff who confirm trades should be distinct from those who agree to and execute trades.

The process of confirming trades should be done only by Operations staff.

Only staff who agree to and execute trades should be permitted to modify any details of the written confirmation.

A level of risk on derivatives

A type of option

A derivative benchmark

A derivative strategy using options

Wednesday against Thursday

Thursday against Friday

Friday against Monday

Monday against Tuesday

Society for World-wide Interbank Financial Transactions

Society for World-wide Interbank Financial Telecommunications

Society for World-wide International Financial Transactions

Society for World-wide International Financial Trading

They must remain neutral and stay out of disputes between their customers.

They must rely on the execution venue to resolve disputes.

They must delegate the resolution of broken trades downstream to their clients.

They must take responsibility for the swift resolution of any disputes.

The head of trading

The head of IT

The board of directors (top management)

One cannot say, it depends on the financial institution

The counterparty would cancel the deal

The bilateral limit with the counterparty would have to be adjusted

The counterparty would demand interest on the late payment

There are no adverse financial consequences

14 December

15 December

16 December

17 December

18 -19 August

20 August - 20 September

20 - 21 August

19 - 20 August

The SEC Emergency Short Sale Rules

The ISDA Master Agreement

The Global Master Repurchase Agreement published by the ICMA

An International Securities Lending Agreement

The lead manager to acquire the entire issue

The lead manager to acquire the entire issue and the issuer to redeem the note at specified dates

The issuer to redeem agreed upon quantities of the note at specified dates

The note holder to sell the notes at specified dates

EUR 694.44

EUR 781.94

EUR 1,041.67

EUR 1,129.17

USD payment to Bank A

USD payment to Bank B

JPY payment to Bank A

JPY payment to Bank B

Internal transactions should not be confirmed as there is no credit risk involved

Chasers on internal confirmations should be sent less frequently than those for external confirmations

Internal confirmations should be subject to the same procedures as those in place for external clients

Control procedures should be relaxed generally for internal confirmations

To avoid too heavy a workload for operations staff

To reduce settlement and credit risk

To enhance the straight through processing

To reduce the brokerage fees

1. Gather all the required documentation; 2, Reach an agreement with your dealer; 3. Send a claim to the counterparty

1. Inform the compliance officer; 2, Gather all required documentation; 3. Contact the counterparty's dealer; 4. Reach an agreement with the counterparty's dealer

1. Contact the banks' attorney; 2. Ask your dealer to amend or to cancel the deal; 3, ask the accounting department to the adjust value date

1. Gather all required documentation; 2. Determine the origin of any discrepancy 3, get in contact with the counterparty and submit the facts 4. Reach an agreement with the counterparty

London Interbank Overseas Rate

London Interbank Offered Rate

Lending Interbank Offered Rate

Leading Interbank Offered Rate

Profiles for functions are encouraged and should be reviewed semi-annually by a manager.

Developers should have unrestricted access to production systems.

Access to production systems should be rigorously controlled.

Users should not have access to change system functionalities.

EONIA - 5 basis points

EONIA flat

0%

EONIA -10 basis points

Each transaction should be processed always in advance of the payment cut-off time.

Know the status of your trade.

Prioritize trade settlement considering payment cut off times including currency sensitivity and size of amount.

A trade booked in the front office should be available to the cash management department no later than the close of trading day for nostro account management.

Any dealer as long as he/she is not a party to the trade

Back-office/operations staff

Dealing room staff who are not currently dealing

Any staff outside the dealing room

Money market taking and placing, sale and repurchase agreements (repos)

Currency options and currency futures

Spot FX transactions

Caps, floors, collars, and interest rate futures

Claims after 30 days of the actual settlement date need not to be submitted.

Claims should be sent to the counterparty as soon as possible and within 30 days at the latest.

Claims must be sent to the counterparty within 15 days of the actual settlement date,

The maximum time limit for a claim submission is 60 days.

Both currencies will be settled value date Friday

GBP will be settled value Friday, CHF value Thursday

Both currencies will be settled value Thursday

GBP will be settled value today, CHF will be settled value Friday

The front office

The back office (Operations)

The U department

The middle office

If you have credit balances on several nostro accounts and have to use these balances to cover your outstanding payment orders

If your nostro A shows a debit whereas your nostro B shows a credit balance, you allow correspondent B to use your credit balance to work with, in order to receive credit interests to partially or totally cover the overdraft interests on nostro A.

If at the end of a month, you want to collect the credit balances and to ask for credit interest

If the net balance on a nostro account is higher than the amount agreed upon with your counterparty

Operations

Compliance

Internal Audit

Archives

Once the trade is agreed to by both the front offices

As soon as one of the counterparties has confirmed the trade

Once the confirmation is accepted by both parties to a trade

As soon as the master agreement has been signed by both parties

On the trade date

On the maturity date of the FRA

Daily in accruals

On the start date of the FRA

The taping of conversations between counterparties

Model signing-off and implementation controls

The separation between front/back office duties

The existence of contingency plans

Tuesday, 30 March

Wednesday, 31 March

Thursday, 1 April

Friday, 2 April

USD 3,691,399.04

USD 3,691,399.00

USD 6,772,500.00

USD 6,773,000.00

Market and loss

Market and money

Market and credit

Market and unavailability

Cash-settled currency forward between two counterparties

Exchange-traded, cash-settled currency forward

Over-the-counter, cash-settled spot FX

Principal-settled currency forward between two counterparties

MT 202 and MT 103

MT 202 and MT 210

MT 200 and MT 103

MT 103 and MT 210