Chapter 1 Flashcards
When may a bond investor have legal recourse against the issuer of the bond
if repayment doesn’t occur or if the interest on the bond isn’t paid
How is ownership of registered securities recorded, and does this make it easier or harder to transfer when compared to a bearer security?
Furthermore, what are the flaws in using bearer form for securities?
Registered securities are recorded on a digital register, usually handled by a CSD
bearer easier to transfer: just hand it over, bearer is owner
What is the role of CSDs in holding bearer securities. + Purpose?
Give 2 examples of CSDs and 2 examples of bearer securities
Holds them as immobilised.
Easier to pay income due and reduces laundering as regulators are involved.
Euroclear and Clearstream
Eurobonds and ADRs( American Depositary Receipts)
What 2 things are competing with stock exchanges for trading volumes
MTFs (=euro version of ATS)
Intermediaries proprietary trading (Dark pool)
What is a dark pool. Give another name for it.
Intermediary/inter-dealer broker which trades on proprietary.
Also known as Electronic communications network
For previously OTC trades, what systems are being required by regulators for oversight?
Trade aggregation systems
(I think this refers to repository’s to log trades as well as requiring the use of CCPs)
Bonds vs Equities :
Trading value, size and trade frequency
For these 3, are bonds higher or lower than equities (do them individually)
Higher value and size, lower frequency
Are bonds traded on or off exchange most often
OTC
Who has the largest bond market
Where are international bonds traded most?
What is the largest financial market?
Europe has the highest trading of international bonds, America has the largest bond market
FX - financial market
Give >2 activities of retail sector participants,
Specify those that are fiduciary.
- R.Bank: deposits, payment services mortgages
- Pensions Funds: self-directed or managed
3.Insurance Companies: life and general insurance . payment protection. *premiums are used to buy into the stock/bond markets
4.Investment Services: What to invest in,, arrange purchase, keep investments reviewed, collect income, report activities to customer. *Robo-advisors
5.Financial Planning and Wealth Managements: Both fiduciary
Wealth: more than advice, consider financial situation of client charges portfolio management and custody fees.
Planning: objective assistance with affairs: goals then strategy. includes entire lifestyle of client.
4 participants in the wholesale sector
Brokers, Investment Banks, Fund Managers, Custodian Banks
8 activities of Custodian Banks
Safekeep, Settlement arrangements, COACs processing, provide info on companies and their AGMs, exe FX TRN, report to clients, provide foreign market access.
What does consolidation of a sector mean? give e.g. in wholesale sector services
custodian banking: high competition has led to lower prices and now a small number of global custodians dominate.
- List the essential differences between equities and bonds.
Answer reference: Section 1.1 - What is a bearer certificate?
Answer reference: Section 1.1 - Where are bearer securities typically held and ‘immobilised’?
Answer reference: Section 1.1 - What is the professional sector?
Answer reference: Section 2 - Which are the largest stock exchanges in the world by market capitalisation?
Answer reference: Section 2.1 - What is considered the largest of the financial markets?
Answer reference: Section 2.3 - Where are the main global centres for foreign exchange trading?
Answer reference: Section 2.3 - Which of the following are considered to be active primarily in the retail sector or the wholesale
sector?
* Insurance companies
* Investment banks
* Custodian banks
* Pension funds
* Financial planners
Answer reference: Sections 3 and 4 - What services are typically provided by investment banks?
Answer reference: Section 4.1 - What services do custodian banks provide?
Answer reference: Section 4.4
look em up
5 services of IB
- corporate finance and advisory work; M&a, raising finance ;eg underwriting or bookrunning
-Banking for governments, institutions and companies
-treasury dealing for corporates in foreign ccy; financial engineering to reduce exposure to rates changes
-Investment management for high value; HNWIs, SWFs, CISs
-securities trading; broking and distribution facilities
-Structured products; create and deal with
