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CISI: Securities > Chapter 5: Secondary Markets > Flashcards

Chapter 5: Secondary Markets Flashcards

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SIE Exam flashcards
1
Q

How are markets sometimes characterised as?

A

price discovery mechanisms

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2
Q

How do brokerages operate?

A

Advise clients
Facilitate the transactions between two parties, does not take on any principal
Earn comission

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3
Q

What is acting as a broker sometimes known as?

A

Dealing as agent

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4
Q

How do dealers operate?

A

A dealer can buy or sell securities directly from clients
Investment banks tend to act as dealers on stock exchanges

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5
Q

What are dealers sometimes known as?

A

Dealing as principal

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6
Q

What does ATSs stand for?

A

Alternative trading systems

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7
Q

How would an investment bank utilise an ATS, Alternative Trading System.

A

Internalising customers trades by executing them against other customers’ trades or firms own inventory

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8
Q

What are regulated markets (MiFID)

A

Stock exchanges

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9
Q

What are multilateral trading facilities (MTFs)

A

Systems other than stock exchanges which bring together multiple parties to trade

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10
Q

What are systematic internalisers? (SIs)

A

Investment firms that on a regular and organised basis deal on their own account when executing client orders outside of markets.

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11
Q

What is the trading venue for trading non-equities called per MiFID?

A

OTF - Organised Trading Facility

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12
Q

What does OTC refer to?

A

Over the counter - dealers trading with one another off exchange

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13
Q

What does Dark pool refer to?

A

Trading outside exchanges and only announcing traded price once deal is complete
Good for large transactions

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14
Q

What are dark pools known as in US and UK?

A

US - ATSs
UK - MTFs

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15
Q

When can securities being offered not need to be registered with the SEC?

A

If they conform to registrations set forth in Regulation D

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16
Q

What are the various rounds of equity funding called?

A

A,B,C,D etc.

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17
Q

What is an example of an offering that does not need to be registered with the SEC under Reg D?

A

Tech companies looking for funding in exchange for equity

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18
Q

What are frontier markets sometimes known as?

A

Pre-emerging

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19
Q

What is the SZSE?

A

Shenzen Stock Exchange
For small-mid companies in China

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20
Q

What are Chinese A and H shares?

A

A-Shares - mainland shares, hard for foreign investment
H-Shares - listed in HK, popular with global investors

21
Q

What is a quote-driven system? And one example

A

Market makers agree to buy and sell a set minimum number of shares at quoted prices
E.g. NASDAQ

22
Q

What is an order-driven system? And one example

A

Investors indicate how many securities they want to buy or sell and at what price. System brings these orders together. Common in equities.
e.g. NYSE, TSE, LSE

23
Q

Which trading system provides more liquidity?

A

Quote-driven

24
Q

What is an example of a hybrid system?

A

LSE’s Stock Exchange Electronic Trading Service – quotes
and crosses (SETSqx)

25
Q

How are German and French bonds sold?

A

Auctions

26
Q

What are GEMMs obligations?

A

Two-way prices
Bid on gilts
Provide info to DMO on trade info

27
Q

What are GEMMs privileges

A

Bid on GILTs
Trade as DMO CP
Access gilts inter-dealer brokers (IDBs)

28
Q

Who does a GEMM not need to provide two way quotes to?

A

Other GEMMs / IDBs

29
Q

What is a Gilt Inter-Dealer Broker?

A

Arrange deals between GEMMs anonymously
Cannot take on principal, acts as agent
Settles the transactions as if it were the principal
Can only act as a broker between GEMMs

30
Q

What are execute and eliminate orders?

A

Execute as much of the trade as possible and cancel the rest

31
Q

What is a fill-or-kill order

A

Fill the entire order immediately or cancel it

32
Q

What is a all-or-none order

A

Same as fill-or-kill but will only be cancelled at the end of the day

33
Q

Benefits of CCP?

A

Reduced CP risk
Anonymity
Reduced admin (only one CP)
Netting
Improved prices (more participants)

34
Q

What is an IDB, Inter-Dealer Broker?

A

Exchange member firm that has registered to act as an agent between dealers (e.g. market makers)
Provides anonymity

35
Q

Can an exchange block a trade?

A

Yes, they can halt trading

36
Q

Who maintains the FTSE 100 index?

A

FTSE Russell

37
Q

What is the STOXX index?

A

Global developed markets

38
Q

What is the FTSE All-Share

A

Full listing on the LSE in £/EUR
600 companies

39
Q

What is a total return index?

A

One that factors in dividend reinvestments

40
Q

How are stocks weighted in a free-float factor index?

A

Free float calculated to nearest 5%

41
Q

What is a decentralised dealer market structure?

A

Where investors can buy/sell without a centralised location
No exchange

42
Q

What is an example of a centralised corporate bond exchange?

A

LSE’s ORB Order Book for Retail Bonds

43
Q

How can dealer-to-dealer bond trading occur?

A

Phone
IDB voice broking the deal
Electronically via a trading platform etc MTS Cash or BrokerTec

44
Q

How can dealer-to-customer trading occur?

A

Voice trading
Electronic platform, TradeWeb, MTS Bondvision, Bloomberg FIT, Liquidnet and MarketAxess

45
Q

How do dealer-to-customer systems operate?

A

On a RFQ, request for quote basis
Investors will request quotes from many dealers platforms

46
Q

What are the two factors that affect bond pricing?

A

Issuer and market factor

47
Q

What are the issuer factors that will affect price? (3)

A

Credit rating
Structure/seniority of issue
Yields on other benchmark bonds

48
Q

What are the market factors that will affect bond pricing? (3)

A

Liquidity
Method of trading
Ability to borrow

CISI: Securities (10 decks)

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