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

The Monetary Authority of Singapore (MAS) is the primary regulator for all capital markets activities including futures trading under the Securities and Futures Act.

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

A futures contract is a legally binding agreement to buy or sell a specific asset at a predetermined price on a specified future date.

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

Initial margin acts as a performance bond or good-faith deposit that protects the clearing house against potential default by either party.

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

Marking to market is the daily process of crediting or debiting margin accounts based on the change in the futures contract's settlement price.

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

A short position profits when prices fall, making it the appropriate strategy for a trader with a bearish view on crude oil.

CMFAS Practice Test

CMFAS Practice Test

CMFAS Futures and Derivatives M4