Chapter 3: Technology and the Functional Flow of Financial Investments Flashcards
What is an MTF
A multilateral trading facility is any type of system or service that brings together multiple parties interested in buying and selling financial instruments, especially those that may not have an official market
What is an SI
systematic internalisers are investment firms that execute client orders on their own account outside a regulated market, MTF or OTF without employing a multilateral matching system.
What is an RIE
A recognised investment exchange is one that is based in the UK and is recognised by the FCA
What is an ROIE
A recognised overseas investment exchange is one that is based outside of the UK but admits UK banks and securities firms as members, and is recognised by the FCA
What is a DIE
A designated investment exchange is an overseas exchange that does not carry on a regulated activity in the UK and is not a regulated market.
What are the 3 economic functions of an investment exchange
To provide a means for companies to raise new capital in the form of equities and bonds
To provide facilities for investors to trade equities, bonds and other securities
To create standardised derivative instruments such as futures and options which are based on the underlying securities, and to provide for investors to trade in these derivative instruments
What is an order driven system
Has no designated market makers. Member firms submits buy/sell orders which are matched. Identities are hidden.
What is a quote driven system
Uses market makers. Identity is known to one another. Suitable for illiquid proucts
What type of platform is SETS
Hybrid platform
What type of platform is SETSqx
Hybrid platform
What type of platform is Order book for retail bonds
hybrid platform
What type of platform is SEAQ
Quote driven platform
Which publications/facilities are needed for in house development
Data exchange specifications
Data dictionaries
Data security standards
SLAs
Testing facilities
What is a modular system
Packages that contain a number of core elements that can be added to with further modules
What is the purpose of CCPs
Central counterparties (clearing houses) provide one, both or two of:
Settlement and custody services
Central counterparty services
Who can register for EUI membership
stock exchange member firms, institutional investors, custodians, registrars
What is EUI
Euroclear UK & Ireland
What is an example of a CSD
An example of a central securities depository would be EUI and equivalent services
What is novation
The substitution of one party to a contract by another party
What are the services offered by EUI
Settlement service
custody service
payment of dividend
processing of COACS
Stock lending and borrowing
What is SPAN
Standardised Portfolio Analysis of RISK uses a sophisticated set of algorithms to determine initial margin according to a global assessment of the one-day risk in a traders account.
What is the difference between a non clearing member and a general clearing member
An NCM does not clear its own trades and only needs connectivity to exchange’s systems, whereas a GCM need connectivity to Exchange’s systems and clearing house’s systems
What is a trade repository/swap data repository
an entity that centrally collects and maintains the records of OTC derivatives.
What is RTS1 and what is their timeline for reporting
shares, depositary receipts, exchange-traded funds, certificates, and other similar financial
instruments and on transaction execution obligations in respect of certain shares on a trading venue or by a systematic internaliser – as near to real time as possible, but within one minute of execution
What is RTS” and what is their timeline for reporting
bonds, structured finance products, emission allowances, and derivatives – as near to real
time as possible, but within five minutes of execution
What is the difference between trade reports and transaction reports
Trade reports are for public dissemination, whereas transaction reports are private reports to the relevant regulator and their use is entirely different.
Where di MiFIR Reports need to be sent to
National Competent Authority (NCA)
