ASDASD Flashcards
Markets in Financial Instruments Directive
MiFID is designed to integrate Europe’s financial markets. Implemented in 2007, it is a directive that regulates firms that provide financial instruments. It is a framework for investment intermediaries and the organised trading of financial instruments. In 2018, MiFID II took effect with the following key changes:
Market structure requirements
Extended transparency requirements
Rules on research and Inducements
Governance requirements
Introduction of a harmonised commodity position limits regime.
What does RIOTARS stand for?
Request Industry - (Porters / PESTEL) Ownership - Ownership structure Trading - Historical performance of the business Ability to Repay Risk / Return Security
How to assess a management team
Technical Skills Financial Skills HR Succession Plan Risks Technological Aims Strategic Aims Marketing Skills
Earn Outs
When there is a difference between the respective valuations the prospective buyer and seller give to a business, an earn out can bridge the gap. Earn outs provide a contractual agreement that they will receive additional compensation based on the businesses future performance.
European Market Infrastructure Regulation
EMIR is regulation that imposes requirements on institutions that deal in derivatives. It came into force in 2012 and is intended to improve transparency and reduce risks associated with this market.
Single Supervisory Mechanism
SSM is a single rulebook for prudential supervision of credit institutions in Europe. It creates a new system of banking comprising the ECB and the national competent authorities of member states. It aims to ensure safety and soundness of the EU banking system.
Second Payment Services Directive
PSD2 came into force in January 2016 and acts as a follow-up to the first PSD. Its key changes are summarised in the following 4 themes: Market efficiency and integration Consumer protection Competition and choice Security
Payment Services Directive
The PSD is a European directive implemented in the UK in 2009 in the form of payment services regulation. It introduced an authoritarian and registration regime for payment institutions. It has 5 objectives:
Achieve a single payment market in EU
Provide regulatory framework for single payment market
Create a level playing field and enhance competition
Ensure consistent consumer protection
Create potential for more efficiency of EU payment systems
Foreign Account Tax Compliance Act
Became law in 2010. FATCA is a US law who’s aim is to ensure US individuals and companies pay the right amount of US tax.
Bribery Act 2010
Brought into force in July 2011, it modernises the law in relation to bribery. Bribery can be defined a giving some financial or other advantage in order to encourage them to perform their function improperly, or as a reward for having done so. There are no specific provisions regarding this however, having a whistleblower policy is seen as good practice.
Dodd Frank Wall St Reform
Signed into law in July 2010 by Obama. It is the US response to the global financial crisis and in particular, the derivates market. It has the following aims:
To promote US financial stability
To bring an end to the threat of financial stability presented by “Too big to fail banks”
To protect US taxpayer from bailouts
To protect consumer from abusive financial service practices
It applies to all business that have US operations or stock listings and over 250bn in assets.
Interest Rate Swaps
An interest rate swap involves an intermediary bank matching two borrowers that wish to swap interest payments due on two separate loans. Typically one being a floating rate and the other being a fixed rate.
Interest Rate Futures
The buyer agrees to receive interest on a sum of money. The seller agrees to pay the interest on the sum of money on the agreed future date.
Forward Rate Agreements (FRAs)
FRAs are used to hedge future interest-rate risk. They’re arrangements whereby one party compensates another should interest rate differ from an agreed rate at some point in the future.
Cap, Floor and Collar Contracts
A interest rate cap is a contract that gives the business the right to set a maximum level for the interest payable.
An interest rate floor is a contract in which the business pays the bank at the end of each period in which the IR is below an agreed strike price.
A collar is combination of cap and floor.
