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Intro to Securities and Investment > Chapter One - Introduction > Flashcards

Chapter One - Introduction Flashcards

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SIE Exam flashcards
1
Q

How much did the financial services contribute to Uk economy last year?

A

173.6 billion

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2
Q

Financial services employed how many people in 2022

A

1.1million

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3
Q

Between 2018 and 2021, the value of UK exports of financial services to EU fell by…

A

19%

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4
Q

Between 2018 and 2021, the value of UK exports of financial services to non EU grew by…

A

4%

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5
Q

GFCI is

A

Global Financial Centres Index

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6
Q

What is Global Financial Centres Index?

A

Produced by China Development Institute

Evaluates rankings and future competitiveness of major financial centres based on:

1) business environment
2) human capital
3) infrastructure
4) financial sector development
5) reputation

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7
Q

Name 2 other words for “professional” sector

A

Wholesale and Institutional

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8
Q

Financial activities that make up professional sector (8)

A

equity markets
bond markets
foreign exchange
derivatives
insurance
fund management
investment banking
custodian banking

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9
Q

Financial activities that make up retail sector (5)

A

Retail banking
insurance
pensions
investment services
financial planning/advice

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10
Q

Equity markets

A

name given to stock markets where the shares of companies are traded

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11
Q

Market Capitalisation

A

Total value of shares quoted on world stock exchange

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12
Q

The worlds third largest exchange is

A

The Shanghai Stock exchange

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13
Q

Rivals to traditional stock exchanges are called

A

Multilateral Trading Facilities

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14
Q

Multilateral Trading Facilities

A

systems that bring together multiple parties interested in buying/selling

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15
Q

Bond Markets

A

These allow governments and companies to raise loans or debt finance directly from investors and then facilitate the subsequent secondary trading of debt securities

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16
Q

What’s larger in size, bond or equity markets

A

Bond

Both in size and value
But lower volume of trades

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17
Q

Who has largest bond market

A

US - by a long way

Trading in international bonds is done mostly in Europe though

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18
Q

What market is largest

A

FX Markets

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19
Q

the rate at which currency is exchanged is due to

A

supply and demand eg if there’s strong demand from japan for US assets, the dollar will rise in value

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20
Q

FX is what type of market

A

Over the counter (OTC)

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21
Q

What does OTC market mean

A

one where brokers negotiate directly

22
Q

5 main FX locations

A

1) UK
2) other
3) US
4) singapore
5) hong kong
6 japan

23
Q

Derivatives markets

A

trade a range of complex products based on underlying instruments: currency, indices, interest rates, equities, commodities and credit risk

Futures and options two of the most well know

24
Q

largest derivatives market

A

Chicago Mercantile Exchange

25
Q

the growth in derivatives market…

A

came about an a reaction to the 2000-02 stock market crash as trades sought to hedge their position against interest rate risk

26
Q

What do insurance markets specialise in?

A

management of risk

27
Q

what is Lloyds of London?

A

Market place that brings together a range of insurers, each of whom accepts insurance risks as a member of one or more underwriting syndicates

Lloyds names join together in syndicates

Each syndicate hopes premiums received will exceed claims out and increase profits

28
Q

what is reinsurance

A

insurers protecting themselves using reinsurance firms.

can cover an entire portfolio or a single risk

29
Q

what’s another name for saving institutions

A

building societies

30
Q

What are building societies?

A

jointly owned by the individuals who have deposited money or borrowed money ‘the members’

31
Q

What’s demutualisation?

A

legislation was introduced allowing building societies to become companies

32
Q

example of building societies

A

Nationwide building society
National Savings and Investment

33
Q

what is NS&I

A

largest savings organisations
operated by the govt
in return the govt pays interest or prizes for premium bonds and offers 100% security

34
Q

peer to peer lending

A

cuts out banks so borrowers get better rates
in exchange for accepting greater risk, savers can earn higher returns
rates vary dependant on type of borrower

35
Q

Crowdfunding

A

funding a project or venture by raising small amounts of money from lots of people

36
Q

types of crowdfunding (3)

A

donation
debt crowdfunding = investors receive money back with interest
equity crowdfunding = people invest in exchange for equity

37
Q

What do investment banks offer (5)

A

Corporate finance and advisory work
Banking
Treasury dealing
Investment management
Security trading

38
Q

Insurance companies…

A

collect premiums in exchange for cover provided
This is used to buy investments such as shares and bonds and as a result the insurance industry is a major player in stock market
they realise investments to pay any claims

39
Q

Fund managers…

A

professional management of investment portfolios

40
Q

stockbrokers…

A

traditionally they arranged trades on behalf of their clients which include institutions, fund managers and clients. Today they make money by using their skill to execute large trades

41
Q

wealth managers…

A

charge a fee for advice

42
Q

Custodian banks specialise in…

A

holding assets for safekeeping
arranging settlement
processing corp actions
AGM info
Managing cash transactions
FX
reporting

43
Q

Platforms are online services used by intermediaries. Platform refers to wraps and fund supermarkets. what are these?

A

Wraps offer more access to ISA, pensions and insurance. Able to take more holistic view of assets client has
Fund supermarkets offer lots of services - unit trusts and OEICS

44
Q

Financial planning

A

Main objective is to help organise financial affairs

45
Q

Financial advisers

A

Offer advice
Fact find clients and suggest appropriate action
Independent advice - unbiased advice
Restricted advice - only give advice on a range, need to be made clear to FCA

46
Q

Execution Only

A

Firms need to be clear they gave no advice. Not responsible for suitability

47
Q

Robo advice

A

Uses tech to provide advice
Prospect enters data and then algorithms decide investments

48
Q

Fintech

A

Can be used in many ways eg online banking, data collection, faster client onboarding
2019 dept for trade and treasury published document highlighting UK as forerunner. Uk govt setting global standards
FCA looking at fintech for regulation. Initially done using robo advice, now uses sandbox (gives them a chance to test fintech)

49
Q

What does ESG stand for

A

Environmental
Social
Governance

50
Q

What organisation determines ESG rating

A

MSCI

51
Q

Trade and professional bodies examples

A

Bonds - international capital market association
Derivatives - FIA europe, international swaps and derivatives association
Fund managers - investment association
Insurance - association of British insurers
Wealth management - PIMFA
Banks - many examples eg asset based finance association and British bankers association
Investment funds - the tax incentivised savings association

Intro to Securities and Investment (8 decks)

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