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CISI: Securities > Chapter 5: Secondary Markets > Flashcards

Chapter 5: Secondary Markets Flashcards

1
Q

What is a Broker?

For securities (simply)

A

Somebody who arranges trades on behalf of a client. Sometimes offering advice and charges commission.

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2
Q

What is a Dealer?

For securities (simply)

A

A dealer deals as principal as they take the principal position. Selling of buying from clients.

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3
Q

What do Investments Banks Pose as in Markets?

A

Broker-Dealers

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4
Q

What is an ATS?

A

Alternative Trading System

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5
Q

As per MiFID II, What are the 3 Trading Venues for Equities?

RMS

A

1) Regulated Markets
2) Multi Lateral Trading Facilities
3) Systematic Internalisers

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6
Q

is

What is OTC?

A

Over the Counter

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7
Q

What is a Dark Pool?

A

Term that refers to a trading system where stocks are traded without the price being displayed until the trade is complete.

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8
Q

What is a Dark Pool Reffered to, in Europe?

A

MTF
(Multi Lateral Trading Facility)

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9
Q

What is a Private Placement?

A

A funding round for securities, which are sold without an IPO, without an approved prospectus to a small number of private investors.

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10
Q

Do Securities in a Placement Have to be Registered with the SEC?

Which Reg are they exempt from?

A

No, exempt from Reg D

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11
Q

What is a Frontier Market?

What are they AKA?

A

Less liquid / developed version of the emerging markets,

Pre - emerging

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12
Q

What is the Market Cap of the SSE and SZSE?

A

USD$7 Trillion and USD$5 Trillion

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13
Q

What is an Inter-Dealer Broker?

Why are these used?

A

Registered agent between dealers.

To protect their identity.

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14
Q

What are the Key Reasons Algorithmic Trading is Used?

3

A
  • Removing Emotion
  • Preservation of Discipline
  • Speed, accuracy and reduced costs
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15
Q

What % of Exchanges are Made up of HFT?

A

50% or more

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16
Q

What is Latency?

How can this be minimised?

A

Time taken to interact with the market.

Co-location, traders using serves in the same location to reduce time.

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17
Q

What are the 7 Main Services Provided by Prime Brokers?

S L C C C R Acc

A
  1. Securities Lending and Borrowing
  2. Leveraged trade execution
  3. Cash Management
  4. Core Settlement
  5. Custodian
  6. Rehypothecation
  7. Access to OTC markets
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18
Q

What is Rehypothecation?

A

Rehypothecation is the practice where banks, brokers, or individuals use collateral that they do not own to help finance assets

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19
Q

What is a Limit Order?

What is an Example?

A

An order that has both a price limit and a time limit.

e.g. Sell 100 shares @ 360 by 30/11/24

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20
Q

What is an Iceberg Order?

Why are these used?

A

Type of limit order, whereby the size is masked. To prevent market upset.

21
Q

What is a Market Order?

A

Do not specify a price and are immediatley executed at the best availible price.

22
Q

What is an Execute and Eliminate Order?

A

Will execute as much of the trade as possible and cancel the rest if i cant meet the price requirements.

23
Q

What is a Fill-or-Kill Order?

A

Will fill all of the order at the best price, or if it cant be met, the wole order cancelled.

24
Q

What is an All-or-None Order?

A

Same as FoK, if the order cannot be filled immediatley, it will wait till the end of the tradin day before cancelled.

25
What are "Multiple Fills"?
When a buy order has been filled with 3 orders of similar price, the weighted average is what is charged to all deals.
26
What are the Benefits of Using a CCP? ## Footnote There are 5
1. Reduced Counterparty Risk 2. Providing total anonymity 3. Reduced administration 4. Facilitating netting of transactions 5. Improved Prices
27
What is Novation? ## Footnote Why is it used.
Novation is the replacement of one of the parties in an agreement between two parties, with the consent of all three parties involved. Protect a firm in case of default.
28
What do Full Service Brokers Provide? ## Footnote What is a typical % of commision for this?
* Provides the client with execution, research and advice. Typically charge 1.5%.
29
What do Discount Brokers Provide?
* Execution only, meaning the fees will be lower. * There is however a minimum charge in case the order is too small.
30
What are Account Fees? ## Footnote When are these waived?
* Fees for managing and undertake admin on behalf of a client. * This can be waived if the client is very active over a certain period.
31
What Fee is Charged by Exchanges?
Stamp duty / Stamp Duty Reserve Tax
32
What is a Cap-Weighted Index?
An index that weights its constituents in terms of its market capitalisation.
33
What is a Price-Weighted Index?
An index that weights its constituents in terms of its share price.
34
What is Free Float Market Capitalisation?
Where larger companies affect the price of the index more than the smaller ones.
35
Is the Dow (DJIA) Mkt-Cap Weighted or Price-Weighted? ## Footnote How many companies?
Price weighted of 30 companies, selected by a committee.
36
How is the DJIA Calculated?
DJIA = ∑p / d P = Prices D = Dow Divisor
37
Why Might the Dow Divisor Change?
To instantly capture any stock splits or price altering company events, to avoid discontinuity.
38
What are the Criticisms of the Dow?
That influencial companies with a smaller share price will have little to no impact on the price sway of the Index. This is why the S&P is recommended to give an understand of the market as a whole.
39
What is Total Return?
Measures the performance and price return, with all dividends reinvested.
40
What is Net Total Return?
Total return - Tax
41
What is a Free Float? ## Footnote Who is this ? (retail)
The amount of stock in circulation that is not held by: * Shareholders owning 5% or more * Restricted stock * insider holdings
42
What is the Free Float Factor? ## Footnote What is the % rounded to and why is it used.
A percentage of issued shares traded in the open market, rounded to the nearest 5%. This then is mulitplied by the market cap to give an understanding of its weighting, and behaviour of the open market.
43
Who are the 4 Major Participants for Government Bond Markets?
1. Gov issuing agency 2. Primary dealers 3. Broker dealers 4. Inter-dealer brokers
44
What is the Main Obligation of a GEMM?
To make 2 way prices for customers on demand.
45
What is a Non-GEMM LSE Member Firm AKA? ## Footnote What can these do?
Broker-dealers, that can buy/sell gilts.
46
What is a Decentralised Dealer Market?
Method for dealing in corporate bonds.
47
What is the ORB?
The LSEs order book for retail bonds.
48
Who uses Electronic Trading Platforms such as MTS Cash or BrokerTec?
Dealer to Dealer.

CISI: Securities (11 decks)

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