ACI Dealing Certificate common mistakes
ACI Dealing Certificate · Understand the traps and how to avoid them.
Treating the FX quote convention as 'the first currency is the one being bought' without checking whether the pair is quoted in direct or indirect terms, then calculating the wrong side of the spread.
Candidates memorise 'buy the base, sell the quote' without internalising that the base currency is fixed by market convention (EUR/USD, GBP/USD, USD/JPY, USD/CHF), so a USD/JPY quote is read backwards relative to a EUR/USD quote. The habit forms because most practice examples use EUR/USD, where intuition happens to work.
What to do instead
Before every calculation, write down which currency is base and which is terms, and state aloud whether the client is buying or selling the base. Practise a mixed set that deliberately alternates EUR/USD, USD/JPY, GBP/USD and USD/CAD so the convention is applied, not assumed. Verify by checking that the resulting amount is expressed in the terms currency.
Confusing pips with figures (big figures) and quoting a two-way price with the wrong number of decimals, or applying a spread of '10 pips' to a JPY pair as if it were 10 decimal places.
Pip conventions differ: most pairs quote to four decimals, JPY pairs to two. Candidates who learn one convention and generalise produce answers that are off by a factor of 100. Exam distractors are built precisely on this error.
What to do instead
Build a one-page table of pip sizes by pair (0.0001 for most, 0.01 for JPY pairs) and re-derive it during revision rather than memorising it. On every question, first annotate the quote with its pip size before doing arithmetic, and sanity-check the magnitude of the answer against the size of a realistic FX move.
Calculating a forward outright by adding the forward points to the spot regardless of whether the points are quoted as a premium or a discount, and regardless of the sign convention.
Candidates treat forward points as always additive because the arithmetic is simpler. In reality the points reflect the interest rate differential and can be negative; adding when the points are a discount produces a forward on the wrong side of spot, which is immediately detectable but often not checked.
What to do instead
Always compute the forward independently from covered interest parity (forward = spot x (1 + r_term x days/basis) / (1 + r_base x days/basis)) and compare it with the points-based answer. If the two disagree in direction, the points have been applied with the wrong sign. Also state which currency has the higher interest rate and therefore which way the forward must move.
Using the wrong day-count basis when computing interest, discount factors or forward points, for example applying ACT/360 to a sterling money-market rate or ACT/365 to a eurodollar rate.
Candidates default to a single basis learned early in study. Money market conventions vary by currency and instrument (ACT/360 for most currencies, ACT/365 for sterling and some others), and exam questions often embed the basis implicitly rather than stating it.
What to do instead
Maintain a currency-by-currency table of day-count conventions and interest calculation methods, and drill questions that mix currencies in one sitting. In every calculation, explicitly write the basis fraction (days/360 or days/365) before substituting numbers, so a wrong basis is visible rather than buried.
Confusing discounting with compounding, or quoting a discount rate as if it were a yield, when pricing money market instruments such as T-bills, commercial paper or CDs.
The formulas look similar and both involve a rate and a day count, so candidates apply the yield formula to a discount-quoted instrument. The resulting price error is small but systematic, and exam questions are designed to separate the two.
What to do instead
Learn the two formulas side by side and note the structural difference: discount rate is applied to face value, yield is applied to the price paid. Practise converting between the two in both directions, and always ask 'is this instrument quoted on a discount basis or a yield basis?' before selecting a formula.
Mixing nominal and effective rates, or annualising a periodic rate by simple multiplication instead of compounding, when comparing investments or converting between rate types.
Candidates carry over simple-interest habits from money market work into compounding contexts. The difference is small at low rates and short periods, which masks the error in casual practice but not in exam questions built around it.
What to do instead
Adopt a fixed routine: identify the compounding frequency, convert to the effective annual rate using (1 + r/n)^n - 1, and only then compare. When a question asks for a nominal rate, state the compounding frequency alongside the answer, because a nominal rate without a frequency is incomplete.
Describing a bond's price-yield relationship only qualitatively ('prices fall when yields rise') without being able to compute modified duration and use it to estimate a price change.
Candidates learn the direction of the relationship but skip the arithmetic because duration feels advanced. Exam questions frequently ask for the estimated percentage price change for a given yield move, and a qualitative answer scores nothing.
What to do instead
Memorise and rehearse the chain: Macaulay duration, then modified duration = Macaulay / (1 + y/m), then percentage price change ≈ -modified duration x change in yield. Practise with a 5-year, 6% coupon bond at several yields until the calculation is automatic, and note that the estimate is a first-order approximation that understates gains and overstates losses for large moves.
Answering ethics questions by choosing the option that is legally permissible or commercially convenient rather than the one that satisfies the market conduct standard, particularly on conflicts of interest, client order handling and personal account dealing.
Candidates read the scenario as a compliance question about whether something is allowed, when the question is testing whether the behaviour meets the professional standard expected of a dealer. The 'technically allowed' option is deliberately present as a distractor.
What to do instead
For each ethics scenario, apply a three-step test before looking at the options: who is the client, what information advantage exists, and would the behaviour survive disclosure to the client and to the regulator. Revise the specific standards on front-running, pre-hedging, order priority and personal account dealing so the correct answer is recognised rather than reasoned out under time pressure.
Misidentifying which institution or mechanism performs a function in the market environment, for example confusing the role of the central bank in monetary policy with its role as lender of last resort, or misattributing clearing and settlement functions.
The market environment domain is treated as background reading and skimmed, so institutions blur together. Questions then test precise distinctions that were never firmly learned.
What to do instead
Build a grid with one row per institution (central bank, commercial bank, clearing house, central securities depository, exchange, broker, market maker) and columns for mandate, typical participants, and what it does and does not do. Fill it from primary sources and test yourself by covering a column and reconstructing it.
Running out of time because calculation questions are attempted in the order presented, with long multi-step problems consuming disproportionate minutes and leaving easy recall questions unanswered.
Candidates treat the paper as a linear test of knowledge rather than a timed exercise in allocation. Multi-step FX and interest rate calculations can absorb several minutes each, and the resulting rush produces arithmetic slips on questions that would otherwise have been correct.
What to do instead
Do a first pass answering only questions that can be resolved in under a minute, marking the rest. Return to calculations with the remaining time, and set a hard ceiling per question (for example 90 seconds) after which you move on and flag. In practice sessions, time every attempt and record which question types overrun, then drill those types specifically.