NISM-Series-X-A: Investment Adviser (Level 1) · Securities Market Segments

Currency, Commodity and SME Markets for NISM X-A

Updated 11 October 2026 · Fact-checked

These are market segments outside plain equity and debt. Currency derivatives let you hedge exchange rate risk, commodity derivatives cover goods like gold and crude, SME platforms list small firms, and REITs, InvITs and the social stock exchange pool money for property, infrastructure and social causes. Match each product to its purpose.

Understand Other Segments: Currency, Commodity and SME Markets

The main equity and debt markets are not the whole securities market. Other segments serve special needs. For the exam, learn what each segment does, what it trades and who uses it.

Currency derivatives are contracts whose value comes from an exchange rate, such as USD-INR. Importers, exporters and borrowers in foreign currency use them to lock in a rate and reduce exchange rate risk. They trade on recognised stock exchanges as futures and options. Exchange-traded currency futures and options on USD-INR, EUR-INR, GBP-INR and JPY-INR, and on the cross-currency pairs such as EUR-USD, GBP-USD and USD-JPY, are cash-settled in rupees, not by delivering foreign currency.

Commodity derivatives are contracts on underlying goods such as bullion, energy, metals and agricultural products. Producers, traders and consumers use them to hedge price risk. SEBI regulates commodity derivatives. The Forward Markets Commission (FMC) was merged into SEBI in September 2015. Commodity derivatives trade on SEBI-recognised exchanges. Depending on the contract, they may be cash-settled or settled by physical delivery.

SME platforms let small and medium enterprises raise equity from the public with lighter listing norms than the main board. Examples are the SME segments of BSE and NSE. Risk is higher because these firms are small and shares can be thinly traded. Trading is often in minimum lot sizes, so advisers must check suitability before recommending them.

REITs and InvITs are pooled investment vehicles set up as trusts. A REIT (Real Estate Investment Trust) holds income-producing real estate such as offices and malls. An InvIT (Infrastructure Investment Trust) holds infrastructure assets such as roads, power transmission and pipelines. Publicly offered, listed REITs and InvITs must distribute at least 90% of net distributable cash flows to unit holders. Net distributable cash flows at the SPV level flow through to the trust. Units of publicly offered REITs and InvITs are listed and traded like shares. Privately placed, unlisted REITs and InvITs also exist. The social stock exchange is a segment within an existing stock exchange where social enterprises, both non-profit and for-profit, can raise funds for social objectives and report on their social impact.

Key formulas to remember

Currency derivative purpose: Hedge = lock in exchange rate (e.g. USD-INR) to cut currency risk; Exchange-traded currency futures and options (USD-INR, EUR-INR, GBP-INR, JPY-INR and the cross-currency pairs) are cash-settled in rupees, not by delivering foreign currency.
REIT vs InvIT: REIT → real estate assets; InvIT → infrastructure assets; Both are trusts. Publicly offered, listed REITs and InvITs must distribute at least 90% of net distributable cash flows to unit holders. SPV-level cash flows flow through to the trust.
SME platform: SME listing = small firms, lighter norms, higher risk, lower liquidity; Separate segment from the main board of the exchange.
Commodity derivatives regulator: Regulator = SEBI, traded on SEBI-recognised exchanges; Do not pick any separate commodity regulator in current-law questions. Settlement may be in cash or by physical delivery, depending on the contract.
Social stock exchange: SSE = segment of an existing stock exchange for social enterprises; It is not a separate standalone exchange.

How to solve Other Segments: Currency, Commodity and SME Markets questions

Most questions give a need or a description and ask you to name the segment or product. Work from the purpose.

1Read the question and underline the need: hedge, raise capital, earn rental income, fund social impact.
2Identify the underlying: exchange rate, physical commodity, small company shares, real estate, infrastructure or social enterprise.
3Match it to the segment: currency derivatives, commodity derivatives, SME platform, REIT, InvIT or social stock exchange.
4Check the regulator and venue: SEBI and a recognised stock exchange.
5Eliminate options that mix up features, such as a REIT holding roads or a currency contract settled by delivering dollars.
6Pick the option that fits both the underlying and the purpose.

Quickest way: Underlying-first matching

When to use it: Use for any definition or identify-the-product MCQ when time is short.

Find the underlying word in the stem: rupee-dollar, gold, offices, roads, small company, social.
Link it to one product: currency, commodity, REIT, InvIT, SME or SSE.
Scan the options for that product and ignore the rest.
If two options remain, check for a trap word like delivery, bank or standalone.

Common mistakes in Other Segments: Currency, Commodity and SME Markets

Saying REITs hold infrastructure and InvITs hold real estate.
The names look alike and both are trusts.
Fix: Remember R for Real estate, I for Infrastructure.
Believing currency derivatives involve delivery of foreign currency.
Students think of a forward with a bank.
Fix: Exchange-traded currency futures and options are cash-settled in rupees.
Treating the social stock exchange as a separate exchange.
The name suggests a standalone body.
Fix: It is a segment within an existing stock exchange.
Assuming SME shares are as liquid and safe as main board shares.
Both are listed and traded on exchanges.
Fix: SME listings carry higher risk and lower liquidity, so check suitability.
Thinking commodity derivatives are outside SEBI's control.
Older material mentions a separate commodity regulator.
Fix: Use the current position: SEBI regulates commodity derivatives.

Worked examples

Example 1

An Indian importer must pay US dollars in three months and fears the rupee will weaken. Which product best manages this risk, and how is it settled on an exchange?
A) Commodity futures settled by delivery
B) Currency derivative settled in rupees
C) REIT units settled in dollars
D) SME equity settled in gold

Show the solution

Need: protect against a rise in the cost of dollars, which is exchange rate risk.
Underlying: USD-INR exchange rate, so a currency derivative fits.
Exchange-traded USD-INR futures and options are cash-settled in rupees.
Option A has a commodity underlying, which does not hedge the dollar exchange rate. Options C and D use the wrong underlying or the wrong settlement.

Answer: B) Currency derivative settled in rupees

Example 2

An investor wants listed units that give regular income from toll roads and power transmission lines held through a trust. Which product is this?
A) REIT
B) InvIT
C) SME platform share
D) Currency future

Show the solution

Underlying assets are roads and transmission lines, which are infrastructure.
A trust holding infrastructure assets and distributing income is an InvIT.
A REIT holds real estate such as offices, so it does not fit.
SME shares and currency futures have different underlyings.

Answer: B) InvIT

Exam tips

Link each product to its underlying in one line and revise those lines before the test.
Expect REIT versus InvIT questions. Check whether the assets are property or infrastructure.
Watch for words like standalone, delivery and guaranteed in options. They are usually traps.
With negative marking, skip only if you cannot cut options to two.
For advice-style questions, remember SME and thinly traded units need a suitability check.

Practice questions from Securities Market Segments

Other Segments: Currency, Commodity and SME Markets: frequently asked questions

What is the difference between REITs and InvITs?

A REIT holds income-producing real estate such as offices and malls. An InvIT holds infrastructure assets such as roads and power lines. Both are trusts. Publicly offered, listed REITs and InvITs must distribute at least 90% of net distributable cash flows to unit holders, and SPV-level cash flows flow through to the trust.

What are currency derivatives used for?

They let you lock in an exchange rate such as USD-INR. Importers, exporters and others with foreign currency exposure use them to reduce exchange rate risk. They trade on recognised exchanges, and exchange-traded currency futures and options are cash-settled in rupees.

What is an SME platform?

It is a listing segment where small and medium enterprises raise equity with lighter norms than the main board. Risk is higher and trading can be thin. Advisers should check suitability before recommending such shares.

What is the social stock exchange?

It is a segment within an existing stock exchange. Social enterprises can raise funds there and report their social impact. It is not a separate standalone exchange.