General 2 Flashcards
What is a Limit Order?
A “no worse than” order. A limit is placed on how much the trader is willing to sell for or buy for (eg. Sell 6,000 at no worse than 210)
What is an Iceberg order?
Allows only part of a big order to be displayed. Once the first tranche has been fulfilled, the next lot comes onto the order screen.
What is a Market Order (at best)?
Buying/selling at the best price available. Certainty of execution at whatever price is best.
What is a Execute and Eliminate Order?
Order has a limit price and will be filled as far as possible at the price specified, then any remaining part of the order will be cancelled
What is a Fill or Kill order?
Has a limit order, but cannot be partially filled. If exact price and quantity cannot be matched, the whole order is cancelled.
What is an MTF?
Crossing matching engine for equities.
Treated as an exchange
What is a OTF?
Crossing matching engine for bonds and derivatives
Operated by Investment Firms
Treated as an exchange
What is a Dark Pool?
Off exchange. Exchange liquidity but OTF confidentiality (hidden orders)
Run by Investment Firms
Used by funds
What is a Systematic Internaliser?
Firms performing principle or cross trades and matching their own clients orders
From acts as Central Counterparty
What are the differences between Warrants and Covered Warrants?
Where warrants are issued by a company, covered warrants are issued by Investment Banks allowing Call and Put warrants from existing shares
Warrants normally mature over a years time whilst covered warrants normally mature within a year
What’s are Contracts for Difference (CFDs)?
Cash settled derivative whereby an investor may go long or short against another investor and lose/gain the margin to which the underlyings price moves. Eg. FTSE 100 Index
Essentially, the amount of which the price moves is exchanged.
Explain the structure of Unit Trusts
Legally trust
Open-ended
Trades units at NAV
Bid-Offer spread
Supervised by trustee and managed by UTM
Explain the structure of ICVCs
Legally company
Open-ended
Trades shares at NAV
Single pricing
Supervised by Depository and managed by ACD
Explain the structure of Investment Trust Company’s
Legally company
Closed-ended
Trades shares at market value
Bid-Offer spread
Supervised by independent auditors like a normal company
What is Continuous-Linked Settlement (CLS)?
A cross currency settlement system operated by CLS bank which reduces Herstatt Risk (risk of of paying and not receiving payment)
Settlement focused on 5 hour window with Payment V Payment
What is a Credit Default Swap (CDS)
Essentially insurance on a bond
Investor pays a premium to a swap bank to protect against the risk of their bond defaulting
Who makes up the Origination Team prior to an IPO?
Legal Advisers
Accountants
PR team
Corporate Brokers
Sponsor (Listing agent)
When looking at diversification in regards to Correlation Coefficient, what are opposite ends of the scale of what numbers could be recorded?
1 = Perfect Positive Correlation
0 = No Correlation
-1 = Perfect Negative Correlation
What is the difference between Fundamental & Technical Analysis?
Fundamental:
•Analysis of a company’s balance sheet, cash flow statement & income statement
•Long term approach
Technical:
•Believes that the fundamentals are already accounted for in the price
•Uses chart data over a shorter period
In regards to IAS 33, why is a diluted EPS required to be published by a company and what is it?
The diluted EPS is to warn shareholders of future changes to the EPS figure (at any time), (eg. if holders of convertible loan stock or preference shares exercise or options/warrants are exercised)
IAS 33 requires this theoretical calculation to be published.
Explain features of a REIT
Closed-ended
Trades shares at market value
Dividends are considered property income and taxed higher
The property-letting business (which is tax exempt) must comprise 75% of the overall company
90% of profits must be distributed
What parts of the Primary and Secondary markets are enforced by the FCA & LSE?
Primary = FCA writes & enforces rules
Secondary = LSE writes & enforces rules * (FCA can still suspend)
What is Bid Basis Pricing?
Spread is moved to the left of NAV, making the Bid the ‘cancellation price’
Encourages buying of the fund - cheap
Used when market moving downward
What is Offer Basis Pricing?
Spread is moved to the right of NAV, making the Offer the ‘creation price’
Slows buying of the fund - expensive
Used when market moving upward
What is Quantitative Analysis?
Uses mathematical models to price & manage products to see if under/overvalued.
Aims to find market inefficiencies. Quantitative funds are actively managed, but stock selection is purely based on computer algorithms.
Define Free Float
The percentage of shares held by the public
