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Securities and Investments > Chapter 1: Intro > Flashcards

Chapter 1: Intro Flashcards

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SIE Exam flashcards
1
Q

The financial services sector does what?

A

Provides the link between organisations needing capital and those with capital available for investment.

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2
Q

Top 5 global financial centres

A

New York, London, Hong Kong, Singapore, San Francisco

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3
Q

The two sectors in financial services

A

Wholesale and retail sectors

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4
Q

What’s the wholesale sector? And what makes up this sector?

A

Known as the professional or institutional sector.

  • equity markets
  • bond markets
  • FX
  • derivatives
  • insurance markets
    Others:
  • fund mgmt
  • investment banking
  • custodian banking
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5
Q

What is the retail sector? What makes up the retail sector?

A

Focuses on services provided to personal customers.

  • retail banking
  • insurance
  • pensions
  • investment services
  • financial planning and advice
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6
Q

What is the equity market?

A

Stock market - shares of companies are traded. It facilitates the trading of shares in quoted or listed companies.

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7
Q

The main stock exchanges

A
  1. New York stock exchange (NYSE)
  2. Nasdaq
  3. Shanghai stock exchange (SSE)
  4. Euronext
  5. London stock exchange (LSE)
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8
Q

What’s an MTF?

A

Multilateral trading facilities - systems that bring together multiple parties that are interested in buying/selling shares, bonds and derivatives.

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9
Q

What’s the bond market?

A

Allow gov and companies to raise loans or debt finance directly from investors. The market then facilitates secondary trading of the debt securities created.

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10
Q

What is the FX market?

A

Facilitates the trading of currencies and exchange rates. OTC.

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11
Q

What is an OTC market?

A

Over the counter - brokers/dealers negotiate directly with one another, no central exchange or clearing house.

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12
Q

What’s the derivatives market?

A

Facilitates trading of currencies, indices, rates, equities, commodities and credit risk. Futures and options.

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13
Q

Where are derivatives traded?

A

Exchange and OTC markets. Chicago mercantile exchange (CME) is largest market.

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14
Q

What is insurance markets?

A

Specialise in the management of risk.

  1. US
  2. China
  3. Japan
  4. UK
  5. Germany

Allianz and AXA are the biggest.

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15
Q

What is a retail bank?

A

Provides services such as taking deposits or lending funds to retail customers, as well as providing payment and money transmission services.

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16
Q

What is a saving institution?

A

Specialised in saving products to retail customers but not offer same services as a bank. NS&I (national savings and investment).

17
Q

What is P2P?

A

Peer to peer lending. Profit by feeing customers when borrowing (slightly lower rates), but savers get improved headline rates.

18
Q

Why was ISA created and what is it?

A

Individual savings account - P2P deposit can be sheltered in a tax free wrapper.

19
Q

What is crowdfunding?

A

Practice of funding a project or venture by raising small amounts of money from a large number of people.

  • donations
  • debt crowdfunding (investors get money back with interest)
  • equity crowdfunding (people invest in exchange for equity)
20
Q

What is an investment bank?

A

Provide advice and arrange finance for companies that want to float, raise finance and carry out M&A. Also provide services for people wanting to invest in equity or bonds.

21
Q

Investment bank sectors:

A
  • Corporate finance and advice
  • Banking
  • Treasury dealing
  • Investment management
  • Securities trading
22
Q

What are pension funds?

A

Large, LT investors in shares, bonds and cash. Sometimes invest in physical assets, like property.

23
Q

What are insurance companies?

A

Provide services to protect and cover people/institutions.
Collect premiums in exchange for cover. Premium is used to buy investments such as shares and bonds.

24
Q

What are fund managers?

A

Professional management of investment portfolios.

They invest money held by institutions, such as pension funds and insurance companies; as well as for collective investment schemes (CIS’s), such as unit trusts and open-ended investment companies (OEICs) for wealthier individuals.

Also known as investment or asset management.

25
Q

What are stockbrokers and wealth managers?

A

Stockbrokers - use skill to execute large trades in the market, or they offer trading services to retail clients.

26
Q

What are Custodian banks?

A

Banks that specialise in safe custody services, looking after portfolios of shares and bonds on behalf of others.

  • hold assets in safekeeping
  • arrange settlement of purchases
  • manage cash transactions
  • process corporate actions
  • perform foreign exchange transactions
  • provide regular reporting on all their activities
27
Q

What are platforms?

A

Online services used by intermediaries such as independent financial advisers (IFA’s) to view and administer their clients investment portfolios.

Term ‘Platform’ refers to both wraps and fund supermarkets. Wrap accounts enable advisors to take a holistic view of the various assets that a client has in a variety of accounts.

28
Q

What do platforms do?

A

Offer a range of tools which allow advisers to see a clients overall portfolio and to choose products for them. Hargreaves lansdown is an example.

Wraps and fund supermarkets

29
Q

What is a TPA

A

Third party administrator - undertake investment admin on behalf of other firms

30
Q

What are the main trade and professional bodies?

A

Bonds - ICMA
Derivatives- FIA or ISDA
Fund managers - IA
Insurance - ABI
Wealth management - PIMFA

31
Q

What is financial planning?

A

Is a professional service offered to individuals, families and businesses who need assistance in organising finance and lifestyle.

Meets a clients lifestyle.

32
Q

What’s a financial advisor?

A

Professionals who offer advice on financial matters to their clients. They conduct a detailed survey of a clients financial position, which they will then recommend a suitable financial product to match the clients needs.

33
Q

Who’s the FCA?

A

Financial conduct authority

34
Q

What is execution-only?

A

When a customer asks to buy or sell with no advice or guidance from firm.

35
Q

What is robo-advice?

A

Technology providing financial advice, without the involvement of an adviser.

36
Q

What is fintech?

A

The use of tech to enhance and deliver financial service product offerings.

37
Q

What is reinsurance ?

A

Insurers protect themselves by using reinsurance. Hedge risks.

Securities and Investments (11 decks)

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