Chapter 2 Flashcards
The available philippine money market instruments
Treasury bills
Small investors program bills
Cash management bills
reverse repurchase agreements
short-term commercial papers
bankers acceptance
promissory notes
These are domestic government death issued regularly to finance the national government need for capital
treasury bills
These are used as a monetary tool to control liquidity
treasury bills
These are also used for reserve requirements, collateral and as a benchmark for setting rates
treasury bills
This or another form of government debt issued and launched in the late 1990s to attract retail investors
Small investors program bills
This instruments have similar characteristics as the regular auctioned instruments but issued and smaller denominations
Small investors program bills
These are short-term debt notes used in times of tight liquidity and interest rate volatility allowing the government to meet its funding requirements as it stabilizes the interest rate condition of the market
Cash management bills
This are non-tradable overnight placements in the interbank call loan market as a short-term outlet for excess liquidity of banks
Reverse repurchase agreements
This is the bangko sentral ng pilipinas principal tool in its open market operations to control liquidity in the financial system
Reverse repurchase agreements
These are unsecured debt instruments issued by resident corporations which state the terms and conditions of the borrowing
Short term commercial papers,
These are short term debt obligations issued by large commercial banks
Bankers acceptance
These are issued by a number of financial institutions and the popular time deposit products offered by most banks
Promissory note
This represent overnight placement by banks with excess cash in other banks with temporary reserve deficiency
inter-bank call loans (IBCL)
This money market is dominated by government debt issued regularly
domestic money market
Aside from the bsp this is a major investor in money market
banking sector
Other major players in the money market are
Social Security System (SSS)
Government Services Insurance System(GSIS)
Home Development Mutual Fund (HDMF)
Trust funds
Insurance Companies
Private pension funds
mutual funds
retail investors
Prior to 2005 opening of this, there is no organized money market exchange in the country
Fixed Income Exchange (FIE)
Trading activity in the instruments of fixed-income exchange is dominated by the
banking sector
non-bank financial intermediaries
Capital market debt instruments
treasury bonds
fixed rate notes
small investors program bonds
long term commercial papers
asset backed securities
municipal bonds
tier 2 capital notes of banks
dollar-linked notes
other instruments
These are like treasury bills but longer and tenor
treasury bonds
These are direct unconditional obligation of the philippine government like treasury bonds but shorter and thinner usual is 2to7 years
fixed-rate notes
This were launched in the late 1990s to attract retail investors basically the government is issuing this instruments with similar characteristics as the regular action instruments
Small investors program bonds
These are the most common form of corporate borrowings issued by resident corporations
Long-term commercial papers
These are a pool of homogeneous assets that are securitized
Asset-backed securities
These are debts of local government unit undertaken to finance local government projects
municipal bonds
This will provide credit enhancement of municipal bond issues
Local government guarantee corporation and the home guarantee corporation
These are intended to beef up the banks capital structure in order to comply with the bsp capital adequacy ratio
tier 2 capital notes of banks
It is the issuance of subordinate a depth papers with a fixed yield that can be converted into equity upon maturity
Tier 2 capital notes of banks
These are dollar-denominated obligations of the republic of the philippines and other private companies
dollar-linked notes
These are the bonds offered by government owned and controlled corporations the national power corporation and the land bank of the philippines
other instruments
This remains the largest issuer of debt in the country
Philippine government
GOCC
government owned and controlled corporation
Asset-backed securities comprised the bulk of
private issuances, with the rest issued in bonds, corporate notes, and commercial paper lines
This is a comprehensive financial market infrastructure that aims to provide an electronic platform for trading clearing and settlement and depository and custodianship fixed income securities and its derivatives
Fixed-income exchange
BAP
Banker’s Association of the Philippines
It plays a key role in the development of the local capital market by providing an online inter dealer trading platform for the secondary trading of government securities
Fixed Income Exchange
These are equity instruments
common stocks
preferred stocks
convertible shares
warrants
this represent ownership in a company whereby an investor partakes in the prophets ownership and management of the company
common stocks or ordinary shares
They are entitled to voting rights and prorated division of profits among stockholders
common shareholders
They have the last claim on dividends and corporate liquidation
common stockholders
Who can acquire the class a shares
Philippine Nationals
Who can acquire the class b shares
any person, corporation, or association
This is also known as preferential shares and this are given preference over common shares whereby the preferred holders are entitled to dividends or assets of the corporation in case and liquidation
preferred stocke
This usually carries a specific rate of return or fixed dividend and a specified redemption price
preferred stocks
It can be converted into common shares at a specified time and price in the future
convertible shares
These are usually issued together with a bond, preferred stock, or common shares that give the holder the right to buy a proportionate amount of common shares at a specified price and time
warrants
The issuers of the philippine equities markets
Financial issuers
industrial issuers
holding firms issuers
property issuers
services issuers
mining and oil issuers
preferred
warrants, philippine deposit receipts, etc
This sector includes banks and other financial institutions
Financial issuers
This sector includes electricity, power and water, food, beverages, and tobaco, construction, infrastructure, and allied services, chemicals, and diversified industrial
Industrial issuers
This sector includes companies such as ayala corporation, JG summit holdings incorporated, and sm investments corporation
Holding firms issuers
This sector includes land developers and real estate companies included in the sector or ayala land incorporated and robinsons land incorporated
Property issuers
This sector includes media, telecommunications, information technology, transportation services, hotel and leisure, education, and diversified services
services issuers
This includes companies engage in mineral exploration and extraction
mining and oil issuers
Examples of these include pldt 10% cumulative convertible preferred series and ayala corporation class a and b shares
preferred
Examples of these include abs-cbn holdings corporation philippine deposit receipt gma holdings incorporation philippine deposit receipt and megaworld corporation warrants
Warrants, Philippine Deposit Receipts
During the 1980s this are the majority investors in the philippine stock market
Individual domestic participants
From 1990s this have been the active participants in the stock market
Trust departments
insurance firms
institutional investors both local and foreign
More recently they are investing in the equities market by a mutual funds, affording them low initial investment outlay, asset diversification, and professional management
retail investors
This is the philippines formal market for equities transaction
Philippine stock exchange
The instruments traded in the foreign exchange market
Spot transactions
foreign exchange forward contracts
swap contracts
This is the most common foreign exchange transactions
Spot transactions
This is a commitment to buy one currency against another currency at a future date at a predetermined foreign exchange rate
Foreign exchange forward contracts
This is an agreement between two or more parties where the cash flows or exchange into different currencies based on an agreed notional amount and maturity
swap contracts
Most transactions in foreign currency are done through the
Philippine dealing system
It provides a platform for the buyers and the sellers to meet with the provision of real-time weighted average weight and volume of trades for the peso
Philippine dealing system
The instances when the bsp defends the peso from speculative attacks
directly or indirectly
It is when the bsp intervenes by buying or selling foreign exchange in the market
directly
It is when the bsp adjust the regulation on allowable transaction and amount an individual may purchase
indirectly
They are not participants in the philippine dealing system but they also have the option to self their foreign exchange to banks
money changers
Derivative instruments traded in the country with stock
Forward contracts
swap contracts
option contracts
These are contracts which obligate the holder to buy or sell an asset at a predetermined delivery price at a predetermined future date
Forward contracts
This contract specifies a simultaneous exchange in cash flows by both parties based on movements link to the prices values or returns of an underlying asset instruments
Swap contracts
It is an agreement between two parties obligating themselves to fulfil their contractual agreement at specified dates in the future
Swap contract
The most commonly used to swap contracts
Currency swaps and interest rate swaps
This is an contract which is a right but not an obligation to buy or sell an underlying asset at the certain date and price
option contract
The two basic types of options
Put option and call option
It gives the holder the right to buy the underlying asset be a certain date for a certain price
Call option
It gives the holder the right to sell the underlying asset by a certain date for a certain price
Put option
The first three derivatives licenses were given to
citibank
bank of america
hongkong shanghai banking corp
This is the first local bank granted a derivative license
equitable PCI bank
What are the hybrid securities
Convertible bonds
preferred shares
convertible preferred
mortgage-backed securities
options and futures
It is a fund which will assist individuals stock market investors in filing and prosecuting a criminal case against a trading participants
prosecution fund
PERAA
RA 9505
Personal Equity Retirement Account Act
This envisioned to promote long-term savings for a more dependable retirement account
PERAA
This act provides a maximum contribution limit of 100,000 per individual and 200,000 for ofw
PERAA
REIT
RA 9856
Real Estate Investment Trust Act
It is stablish as the framework for a more secure investment in real estate assets
REIT
This is envisioned to stimulate real estate investments and provide a consistent cash flow to investors with a compulsory dividend mandate and reduce income taxes
REIT
RA9510
Credit Information System Act
It is publishes a comprehensive and centralized credit information system allowing financial institutions ready access to accurate and up-to-date credit information for a more credible and stable financial system
Credit information system act
This act is expected to promote financial discipline and lowers intermediation cost of the system
Credit Information System Act
