IFMP Commodity Brokers Certification (CBC), Pakistan flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

PMEX

Pakistan Mercantile Exchange, the SECP-licensed commodity futures exchange where CBC-certified brokers execute client orders in gold, silver, crude oil, and agricultural contracts.

SECP

Securities and Exchange Commission of Pakistan, the regulator that licenses brokers, approves exchange rules, and enforces AML/CFT and conduct requirements in commodity futures trading.

Initial margin

The minimum cash or collateral a client must deposit to open a futures position, calculated as a percentage of contract value set by the exchange and broker.

Maintenance margin

The minimum equity level a client must keep in the account; falling below it triggers a margin call and possible forced liquidation of positions.

Margin call

A broker's demand that a client deposit additional funds after account equity falls below the maintenance margin level, usually within a stated deadline.

Mark-to-market

Daily revaluation of open positions at the settlement price, with resulting profit or loss credited or debited to the client's account.

Segregated client account

A bank account holding only client margin and settlement funds, kept separate from broker funds so client money is protected from broker insolvency.

Limit order

An order to buy or sell at a specified price or better; it will not execute at a worse price than the limit set by the client.

Stop order

An order that becomes a market order once a specified trigger price is reached, commonly used to limit losses on an open position.

KYC

Know Your Customer: identity verification using CNIC and supporting documents, plus AML/CFT screening, required before a broker may open a client account.

Risk disclosure statement

A document the client signs acknowledging the leverage, volatility, and potential for loss beyond deposit inherent in commodity futures trading.

Contract specification

The exchange-defined terms of a futures contract: underlying commodity, size, quotation unit, tick size, delivery month, and last trading day.

Tick size

The minimum price increment in which a futures contract can move, which determines the minimum profit or loss per tick per contract.

Last trading day

The final day on which a futures contract may be traded before it expires or enters the delivery or cash-settlement process.

Best execution

The broker's duty to execute client orders on the most favourable terms reasonably available given price, speed, and order size.

Suitability assessment

The process of matching a client's risk tolerance, experience, and financial capacity to the products and leverage offered to them.

Forced liquidation

The broker's close-out of client positions when margin is not restored, preventing the account from running a negative balance.

Rollover

Closing a position in an expiring contract and opening an equivalent position in a later month to maintain exposure without delivery.

Basis

The difference between the spot price of a commodity and its futures price for a given delivery month; it converges to zero at expiry.

Contango

A market structure where futures prices are higher than spot, typically reflecting storage, insurance, and financing costs of holding the commodity.

Backwardation

A market structure where futures prices are lower than spot, often signalling tight nearby supply or strong immediate demand.

Hedging

Taking an offsetting futures position to reduce price risk on a physical or cash-market exposure, such as a jeweller hedging gold inventory.

Speculation

Trading futures to profit from price movements without an underlying physical exposure, accepting leverage and volatility risk.

Leverage

The ratio of contract value to margin deposited, which magnifies both gains and losses relative to the client's capital.

Commission

The fee a broker charges per executed contract or lot, which must be disclosed to the client before trading begins.

Trade confirmation

A written or electronic record issued after execution showing commodity, contract month, side, quantity, price, and charges.

Order ticket

The record capturing client instructions - buy or sell, quantity, contract, order type, price, and validity - for audit and execution.

Good-till-cancelled order

An order that remains active across trading sessions until it executes or the client cancels it, rather than expiring at day end.

Day order

An order valid only for the trading session in which it is placed; it is automatically cancelled if unfilled at close.

Position limit

The maximum number of contracts a client or broker may hold in a contract, set by the exchange to prevent market concentration.

Delivery notice

A formal notification that a short position will be settled by physical delivery, requiring the seller to tender the commodity per contract terms.

Complaint handling

The documented process for receiving, investigating, and responding to client grievances within prescribed timelines, with escalation to the exchange or SECP.