What is SCLE Module 14?
Module 14, Derivatives, is one of the Securities Commission Licensing Examinations run by the Securities Industry Development Corporation (SIDC). It tests your understanding of futures, options, swaps and other derivatives, how they are priced and how they are used for hedging and trading, including the contracts traded on Bursa Malaysia Derivatives. It is the product module for people who want to deal in derivatives; the rules module is Module 16, Rules and Regulations of Derivatives.
The exam format
| Run by | Securities Industry Development Corporation (SIDC) |
|---|---|
| Questions | 60 multiple-choice questions |
| Time | 90 minutes |
| Pass mark | 70% |
| Book | Closed book; a permitted non-programmable or financial calculator may be used |
| Validity | A pass is valid for two years from the exam date |
| Licence | Check the SC Licensing Handbook for the module combinations accepted for dealing in derivatives |
The module was renamed from Futures and Options to Derivatives, and SIDC added OTC derivatives to the syllabus. Fees and exam modes change, so check SIDC's current terms when you book.
What the exam covers
- Derivatives fundamentals: forwards, futures, options and swaps, market participants and leverage.
- Futures markets: clearing and novation, initial, maintenance and variation margin, marking to market and closing out.
- Bursa Malaysia contracts: FCPO (25 tonnes, RM1 per tonne tick, physical delivery) and FKLI (RM50 per index point, cash settled).
- Pricing: basis, convergence, contango and backwardation, cost of carry and arbitrage.
- Hedging and spreads: long and short hedges, basis risk, hedge ratios with beta, calendar and inter-commodity spreads.
- Options: calls and puts, intrinsic and time value, break-even, payoffs and the Greeks.
- Strategies: protective puts, covered calls, straddles, spreads and collars.
- Swaps and OTC derivatives: interest rate and currency swaps, credit default swaps, ISDA, netting, collateral and risk types.
Free official resources, and what we add
SIDC publishes the exam terms and a study outline, and Bursa Malaysia publishes the contract specifications for each derivative it lists. There is no free official question bank. Our questions are original, and every calculation is shown step by step in the explanation.
How to prepare
- Learn the FCPO and FKLI contract specifications until you can value a tick without thinking.
- Practise margin calls: when the balance drops below maintenance margin, you top up to initial margin.
- Get fast at cost-of-carry pricing and hedge ratios with beta.
- Draw the payoff of each option strategy and know its break-even point.
- Practise one topic at a time here, then sit full 60-question mocks in 90 minutes.
Practice questions with answers
Tap a question to see the correct answer and explanation.
What is a derivative?
- A bank deposit that pays a variable rate of interest
- A bond that pays a fixed coupon until maturity
- A contract whose value depends on an underlying
- A share issued by a derivatives exchange to its members
Answer: C, A contract whose value depends on an underlying. A derivative derives its value from an underlying, such as a commodity, share index, interest rate or currency. Source: SIDC, SCLE Module 14 Derivatives topics.
What is initial margin?
- The broker's commission on each contract traded
- The daily profit or loss on an open position
- The final settlement price set at expiry
- The deposit required to open a futures position
Answer: D, The deposit required to open a futures position. Initial margin is collateral paid when a position is opened, set by the clearing house as a buffer against adverse moves. Source: Rules of Bursa Malaysia Derivatives Berhad and Bursa Malaysia Derivatives Clearing Berhad.
What is the minimum price fluctuation for FCPO and its value per contract?
- RM5 per tonne, worth RM125
- RM0.50 per tonne, worth RM12.50
- RM1 per tonne, worth RM50
- RM1 per tonne, worth RM25
Answer: D, RM1 per tonne, worth RM25. FCPO ticks in RM1 per tonne. With 25 tonnes per contract, one tick is worth RM25. Source: Bursa Malaysia Derivatives contract specifications, FCPO.