Book - Chapter 7 ST Questions Flashcards
- What is novation?
Novation is when a central counterparty becomes the party to a trade.
- What is the standard settlement convention for equity trades in the German market?
In Germany trades normally settle at T +2.
- At what stage does transfer of title legally take place when CREST is settling trades?
ETT takes place at the point at which CREST moves stock between accounts.
- How does DVP reduce risk?
It does so by the simultaneous exchange of cash and securities.
- A custodian is safeguarding stock on behalf of your clients. Whose name would appear on the share register?
The custodian would need to have legal title to the assets in order to be able to settle the trades and so they would be registered in1 the name of a nominee company controlled by the custodian.
- A shareholder sold their shares in a UK company on Thursday. If the stock went exdividend on the same day, who is entitled to the forthcoming dividend?
As the shares were sold on Thursday the trade would have been XO so the seller would be entitled to the dividend.
- What is the major difference between a scrip dividend and a DRIP?
With a scrip dividend, the company issues more shares. With a DRIP, the shares are bought in the secondary market.
- What is the difference between a bonus issue and a subdivision?
In a bonus issue, new additional shares are issued with the same nominal value. With a subdivision, the nominal value is altered.
- What options are open to a shareholder under a rights issue?
An investor can take up the rights, sell them, sell part to take up the balance or lapse the rights.
Why does a predator gain control of a target company when its shareholding exceeds 50%?
Once the predator has more than 50% of the target company they can exercise control by their ability to pass resolutions at company meetings.
