CMFAS Futures and Derivatives M4

Question 1

Under the Singapore Securities and Futures Act (SFA), which regulatory authority is responsible for overseeing futures trading activities?

Accepted Answer

Monetary Authority of Singapore (MAS)

Answer

Singapore Exchange (SGX)

Answer

Commercial Affairs Department (CAD)

Answer

Accounting and Corporate Regulatory Authority (ACRA)

Question 2

What is a futures contract?

Accepted Answer

An agreement to buy or sell an asset at a future date for a price agreed today

Answer

An option to purchase shares at a discount in the future

Answer

A spot transaction settled within two business days

Answer

A loan facility secured against financial instruments

Question 3

What is the primary purpose of initial margin in futures trading?

Accepted Answer

To serve as a performance bond ensuring contract fulfilment

Answer

To represent the full purchase price of the futures contract

Answer

To compensate the broker for transaction costs

Answer

To pay for delivery of the underlying asset

Question 4

Which of the following best describes the process of 'marking to market' in futures trading?

Accepted Answer

Daily settlement of gains and losses based on the closing futures price

Answer

The process of advertising futures contracts to potential investors

Answer

Calculating the theoretical fair value of a futures contract

Answer

Matching buyers and sellers on the exchange

Question 5

A trader who expects the price of crude oil to fall would most likely take which position in crude oil futures?

Accepted Answer

Short (sell) position

Answer

Long (buy) position

Answer

Delta-neutral position

Answer

Straddle position

Question 6

What is the role of the Central Counterparty Clearing House (CCP) such as SGX-DC in futures markets?

Accepted Answer

To become the buyer to every seller and the seller to every buyer, eliminating counterparty risk

Answer

To set the daily futures prices for all listed contracts

Answer

To provide leverage financing to futures traders

Answer

To regulate the conduct of futures brokers

Question 7

Under MAS regulations, a Futures Trading Representative must be appointed by a holder of which Capital Markets Services (CMS) licence?

Accepted Answer

CMS licence for trading in futures contracts

Answer

CMS licence for dealing in securities

Answer

CMS licence for fund management

Answer

CMS licence for advising on corporate finance