ACI Diploma common mistakes
ACI Diploma · Understand the traps and how to avoid them.
Treating the ACI Model Code as a list of ethical aspirations and answering conduct questions with general statements like 'act with integrity', instead of identifying the specific behavioural obligation the scenario breaches (for example failing to execute client orders on the terms agreed, or disclosing counterparty order flow to another desk).
Candidates skim the Model Code chapters once, memorise headings, and never practise mapping a short scenario onto a named principle. Exam conduct items are usually scenario-based and reward naming the concrete breach.
What to do instead
Build a one-page matrix of Model Code themes (client order handling, conflicts of interest, confidentiality, market conduct, personal account dealing, whistleblowing, fair treatment) and write two realistic scenarios per theme with the specific obligation breached. Practise answering in the form 'the obligation is X, the behaviour fails it because Y'.
Confusing the roles of front office, treasury and operations when a question asks who should perform a control, and answering that the trader or the same desk verifies its own trade details.
Candidates learn products and pricing well but treat the dealing room as one undifferentiated function, so they miss segregation-of-duties logic embedded in confirmation, settlement and limit-monitoring questions.
What to do instead
Draw the trade lifecycle end to end (execution, capture, confirmation, affirmation, clearing, settlement, reconciliation, collateral) and label which function owns each step and which must be independent. Review the control points where independence is essential: confirmation matching, P&L and risk verification, limit breach escalation, and collateral dispute resolution.
Calculating FX and money-market questions with the wrong day-count or settlement convention, for example applying 360 days to a sterling money-market rate, counting the spot date from trade date rather than T+2, or ignoring the modified-following convention for month-end value dates.
Candidates memorise formulas but not the market conventions behind them, and under time pressure they default to a single convention for all currencies.
What to do instead
Maintain a convention table by currency and instrument: day-count basis (actual/360 for USD and EUR money market, actual/365 for GBP), spot lag, business-day convention and holiday calendars. Rehearse worked examples where the value date crosses a month end, and always state the convention explicitly before computing.
Mixing up bond price and yield relationships and quoting conventions, such as assuming a price rise always means a yield rise, ignoring accrued interest when asked for the clean price, or misapplying the price-yield direction for a callable or floating-rate note.
Candidates learn duration and convexity as formulas without anchoring them to the inverse price-yield relationship, and they conflate clean and dirty prices under exam pressure.
What to do instead
For every fixed-income question, first write the direction of the relationship and the reason (discounting future cash flows). Then separate clean price, accrued interest and dirty price explicitly. Work through one callable bond and one floater to see how the price-yield profile changes near the call or reset.
Answering hedging and risk questions with the instrument name rather than the exposure being hedged, for example saying 'buy a swap' without specifying direction, tenor, notional and which cash flow is being fixed, or hedging a forecast exposure with a position that creates a new market risk.
Candidates recognise product names from the syllabus and stop at identification, missing that risk-management items test whether the hedge actually offsets the identified exposure.
What to do instead
Answer every hedging item in four parts: identify the exposure (amount, currency, timing, certainty), state the hedge direction and instrument, state the residual or basis risk, and state the accounting or limit consequence. Practise with a forecast receivables hedge, an interest-rate reset exposure and a cross-currency funding mismatch.
Treating regulation as a list of acronyms to be matched to definitions, so a question about which regime governs a specific activity (for example reporting a derivative to a trade repository, or best-execution obligations for a client order) is answered with the wrong framework or a generic 'the regulator requires it'.
Candidates memorise names of regimes without learning their scope, trigger thresholds and jurisdictional reach, and the exam tests application rather than recall.
What to do instead
For each major regime in the syllabus, record four fields: what activity it covers, who it binds, the trigger or threshold, and the reporting or conduct obligation it creates. Then write short scenarios that sit at the boundary between regimes and decide which applies and why.
Missing market-abuse distinctions, for example labelling every unusual trading pattern as insider dealing, failing to separate manipulation from legitimate trading strategies, or overlooking that attempted manipulation and creating a false impression are themselves breaches.
Candidates learn the headline offences but not the elements that distinguish them, and they assume intent is always required or that only completed conduct counts.
What to do instead
Write a comparison of insider dealing, unlawful disclosure, market manipulation and attempted manipulation, listing the elements and the evidence that would establish each. Include borderline cases such as spoofing versus legitimate order cancellation, layering, and trading on information that is merely rumour rather than inside information.
Ignoring the compliance and record-keeping dimension of a scenario, for example answering a client-suitability or order-handling question purely in commercial terms without addressing conflicts, disclosure, best execution or the audit trail obligation.
Candidates compartmentalise the syllabus and treat compliance as a separate topic rather than an overlay on every activity, so they miss marks for the regulatory consequence of an otherwise correct commercial answer.
What to do instead
Adopt a checklist to run over every scenario answer: was the client informed and consented, was the conflict identified and managed, was best execution demonstrable, is there a contemporaneous record, and who must be notified of a breach. Practise adding one compliance sentence to answers in other domains until it becomes automatic.
Confusing treasury cash and liquidity management with trading risk-taking, for example describing a funding gap as a trading loss, treating a collateral call as a settlement failure, or failing to distinguish liquidity risk from market risk in a stress scenario.
Candidates learn risk categories as definitions but do not connect them to the daily treasury workflow of cash forecasting, funding, collateral management and transfer pricing.
What to do instead
Map each risk type to a concrete treasury event: market risk to a mark-to-market move, liquidity risk to a funding gap or collateral call, credit risk to a counterparty default before settlement, operational risk to a failed confirmation. Rehearse a short stress narrative that shows how one event propagates across categories.
Running out of time because the candidate answers numerical questions first and leaves scenario-based conduct and regulation questions, which need reading time, until the end, then writes one-line answers that miss the required reasoning.
Candidates underprepare for the mix of question types and assume calculations are the hard part, so they misallocate time and lose marks on items they could have answered well.
What to do instead
Do timed mock papers with a fixed per-question budget, and rehearse a two-pass strategy: answer all short factual and calculation items first, then return to scenario items with a structured template (issue, obligation, breach, consequence, fix). Review which question types cost the most time and drill those specifically.