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Detailed FCA > Secondary Markets > Flashcards

Secondary Markets Flashcards

1
Q

Authorised share capital

A

Authorised share capital is the maximum amount of capital that can be raised through share issue

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2
Q

Issued share capital

A

The number of shares the company has allotted to shareholders

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3
Q

Nominal value

A

The fixed legal value of a share

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4
Q

Market cap

A

Number of shares in issue multiplied by the market price of the share

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5
Q

Free float

A

All shares being held by investors other than: owners holding 5% or more of all shares, restricted stocks, insider holdings

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6
Q

A and B Ordinary shares

A

Different classes of shares created to separate ownership and control

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7
Q

Redeemable shares

A

Offered by a company to shareholders that may be bought back by the company at its election. Companies are permitted to issue ordinary shares that can be redeemed as long as conventional non-redeemable ordinary shares are also in issue

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8
Q

Ordinary shares

A

2nd priority, variable dividend, no voting

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9
Q

Preferred shares

A

1st priority, fixed dividends, no voting

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10
Q

Partly paid

A

Each share has a nominal value, which represent the minimum amount that the company must receive from subscribers on the issue of the shares. Occasionally, the company may not demand all of the nominal value at issue, with the shares then referred to as being partly paid

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11
Q

Cumulative shares

A

The right to receive that dividend is rolled over into the next period

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12
Q

Participating

A

Opportunity for further dividend

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13
Q

Redeemable

A

The right for the issuer to buy back the shares

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14
Q

Convertible

A

The right to convert into ordinary shares, zero dividend - pay no income, redeemed by shareholder above the price at which they were issued.

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15
Q

American depository receipts

A

ADRs are used by non-US companies in order to encourage US Dollar investors to buy an equity stake

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16
Q

ADR features

A 
US denominated and US dividend 
Bearer document (American form)
Settlement T+2 
Rights issues: ADR holders receive cash
Bonus issues: alters number of shares
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17
Q

Pre-release (grey market rules)

A

An ADR, or issuing an ADR, secured by cash collateral rather than deposited securities and can be issued in a pre-release format for up to three months (US$ collateral required)

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18
Q

ADR risks

A

Market and company specific risk

FX risk

19
Q

Warrants - Background

A

Right to subscribe for new shares from a company at a fixed price on a future date
Not part of ordinary share capital of company

20
Q

Warrants - Issuance

A

Typically issued as a sweetener with other investments (e.g. corporate debt)
Detachable or non-detachable form

21
Q

Warrants - Conversion premium

A

Warrant price + exercise price - current share price

22
Q

Difference between warrants and options

A

On exercise, warrants create new shares whereas options and covered warrants are exercised into existing shares

23
Q

Warrants main features

A 
Issued by - companies
Shares delivered by - new shares
Maturity - normally > one year
Traded on - OTC/LSE
Types - right to buy the underlying
             share only
Exercise/settlement - physically settled contracts
24
Q

Covered warrants main features

A

Issued by - Investment banks
Shares delivered by - Existing shares
Maturity - normally 6 months to 12 months
Traded on - LSE
Types - Call and put warrants available (right to buy and sell)
Exercise/settlement - Cash and physically settled contracts available

25
Q

Options main features

A

Issued by - Writer
Shares delivered by - Existing shares
Maturity - normally 3 months to 12 months
Traded on - Derivatives exchange
Types - Call and put options available (right to buy and sell)
Exercise/settlement - Cash and physically settled contracts available

26
Q

Indices: Headline news

A

A simple way of summarising market movements

27
Q

Indices construction: Background

A

The majority of indices are value-weighted arithmetic.

Exceptions: (NIKKEI Stock 225 & Dow Jones Industrial Average, price-weighted arithmetic index)

28
Q

FTSE 100

A

Composition - 100

29
Q

FTSE All share

A

Representing 98-9% of UK market capitalisation

30
Q

DJIA

A

Composition - 30

31
Q

Nasdaq Composite

A

Composition - Over 3,200

32
Q

Standard and Poor 500

A

Composition 500

33
Q

Dow Jones Divisor

A

As the DJIA is price weighted, splits, consolidations, spin-offs, etc can have a significant impact on the value of the index. The divisor is an adjustment to ensure such events do not alter the numerical value of the DJIA.

Calculated by summing up all the prices of the component stocks and then dividing by the Dow divisor. The present divisor after many adjustments is less than one, meaning the index is larger than the sum of the prices of the components

34
Q

Nikkei Stock (Japan)

A

Composition 225

35
Q

Hang Seng(China/Hong Kong)

A

Composition - 50 (variable)

36
Q

Eurofirst (Europe)

A

Composition 300

37
Q

DAX (German)

A

Composition 30

38
Q

CAC (France)

A

Composition 40

39
Q

STOXX (Global)

A

Composition 600

40
Q

MSCI (Global)

A

Composition 1700

41
Q

Price return

A

Only the price of the components considered

42
Q

Total return index

A

Calculates the performance of a group of stocks assuming that dividends are reinvested into the index constituents

43
Q

Net total return

A

Same as total return but after the deduction of withholding tax

Detailed FCA (7 decks)

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