Chapter 1: The Financial Services Industry Flashcards
Fundamentally, what do financial services provide?
The link between organisations needing capital and those with capital available for investment
what is an equity?
Shares that represent ownership in a company
What is a bond
A representation of debt
What are the two different types of securities?
Registered or Bearer
What is the difference between registered and bearer securities?
- Registered certificates require that the holders ownership is recorded in a digital register
- Bearer securities only require phyisical possension of the certifcate as proof of ownership (easier to transfer)
What are some drawbacks to bearer bonds
- difficult for authorities to track ownership
- Difficult for issuing org. to know who to pay dividends to
- Physical security of the certificate becomes much more important
How are some of the drawbacks to bearer bonds negated?
Many bearer bonds are held in central securities depositories (CDSs) such as Euroclear and Clearstream. This reduces security risk and allows CDSs to communicate with regulators.
When bearer bonds are held in a CDS, what are they refered to as?
Immobalised
BECDIIFF
Which activities make up the wholesale sector?
There are 8 of them
- Equity markets
- Bond markets
- FX
- Derivatives
- Insurance markets (Corporate, Reinsurance, Captive)
- Fund Management
- Investment Banking
- Custodial banking
RIPIF
Which activities make up the retail sector?
There are 5 of them
- Retail banking
- Insurance
- Pensions
- Investment services
- Financial planning and advice
What is global market capitalisation
the total value of shares listed on the world’s stock exchanges
What are MFTs and AFTs
Systems that bring together multiple parties that are interested in buying and selling financial instruments such as shares.
What are MFTs and AFTs also known as, and who provides them?
Crossing networks or matching engines are provided by an investment firm or other market operator.
Apart from MTFs and AFTs, what other competition is there to the stock exchange?
Inter-dealer brokers (IDBs) or other intermediaries may operate their own propietary trade platforms, sometimes called ‘Dark Pools’ or electronic communicartions networks (ECNs).
What is the difference between retail banks/stock brokers and execution only brokers
Retail banks/stock brokers charge a fee for their service and offer advice, whereas execution only brokers do not offer advice and typically charge commissions and/or profiting from the bid/ask spread on trades executed.
