Securities cram Flashcards
Dow jones number of constituents
30
Nasdaq number of constituents
3200
Nikkei number of constituents
225
Dax number of constituents
30
CAC number of constituents
40
STOXX number of constituents
600
MSCI number of constituents
1700
Bearer bonds
France, Germany, Japan (sometimes)
T+2 bonds
Germany, France
Bonds with annual payments
Germany, France
OATs life
2-50
Schatz life
<2
Bobl life
5-10
Bund life
10-30
Short life
<7
Medium life
7-15
Long life
> 15
T-notes
2-10
T-bonds
> 10
JGB life
2-40 (most common long 10 and superlong 20)
Ratings using +s
S&P and Fitch
Fitch/S&P highest junk
BB+
Fitch/S&P lowest investment grade
BBB-
Moody’s highest junk
Ba1
Moody’s lowest investment grade
Baa3
S&P and Fitch default
D
Moody’s default
C
Modified duration
Approximate price change in response to 1% change in interest rates (liquidity preference)
When interest rates rise
Bond prices fall
FX standard settlement time
T+2
Legals structures of CIS
OEIC/Inv trust = company; unit trust = trust
Open/close of CIS
Unit trust/OEIC = open; investment trust = closed
Holdings of CIS
Unit trust = units; OEIC/investment trust = shares
Supervision of CIS
Unit trust = trustee; OEIC=depository; Inv trust = independent auditors
Management of CIS
Unit trust/inv trust = fund manager; OEIC =authorised corporate director
Investment rules of CIS
Unit trust/OEIC = limited borrowing, fixed rules; investment trust = unlimited gearing, flexible rules
Price systems of CIS
Unit/Investment trust = Bid-Offer (dual), OEIC = single
Value of CIS
Unit trust/OEIC = market value; investment trust = NAV
Brokertec
B2B electronic multitrader platform
eSpeed
B2B electronic multitrader platform
MTS cash
B2B electronic multitrader platform
MTS Bondvision
B2C electronic multitrader platform
Tradeweb
B2C electronic multitrader platform
Equity settlement times
T+2 except when shares are newly issued T+1
Bond/MM settlement times
T+1
Settlement model in Europe
Gross, Simultaneous settlement
Settlement model in US and emerging markets
Gross settlement of securities and net settlement of funds
Global custody
Manages custody arrangements across the full range of foreign markets in which they have invested assets
Sub-custody
Where a local agent is appointed to provide settlement and custody services for assets that a global custodian holds on behalf of clients in a foreign market
Local custodian
Market specialist operating in the same market as the custody assets trade
What you find at top of order book
Highest bid and lowest ask price
What is the special ex-trading period for equities?
Ten days. The special ex-trading period on the LSE is ten business days prior to the ex-dividend date.
Ex-bargain
A special ex-bargain allows the investor to perform a trade in the cum-dividend period (where the buyer is entitled to the dividend), but strip the dividend from the share making it ex-dividend (out of dividend). Essentially, the seller keeps the rights to the next dividend and the buyer, having given-up this right, can buy the share more cheaply
Omnibus account
An omnibus (also known as pooled) nominee is one where individual clients are grouped together within a single nominee registration and is more cost effective than designated, segregated or sole nominees.
Clearstream
Settle Eurobonds
LCH
France uses settles as central counterparty
Euroclear
settles equities/eurobonds as the central depositor
Forward rate adjustment
If the second price is higher than the first it is DEDUCTED
Subscription at nil cost
no. of rights x Subscription price / Theoretical ex-rights price
Bonus issue
Also called Scrip or capitalisation. New shares, nominal value unchanged gap made up from undistributable capital reserves, market cap unchanged
Nil-paid value
ex-rights share price - price of the new shares
Block trades
When an investment bank acting for the company will seek to do a small number of large trades with investors
Accelerated book build
Where investment bank contacts number of institutions, investors in the company to see willingness to sell shares at specific price point and can guarantee the number of shares they will buy at an agreed price if not all are sold
Indirect stakebuilding
CFD so that they get economic exposure of owning a stake in another entity in a less visible and potentially leveraged way
Covered bonds
Where no SPV is created
UK vs US commercial paper
The money market is the term for the market involving cash deposits and short-term instruments that are issued with less than one year to their maturity. CP is the corporate equivalent of a government’s Treasury bill. CP is issued at a discount to its nominal value and can have a maturity of up to one year in Europe and 270 days in the US; however, it is common to find in both territories that CP will be issued for three months.
Benefits of cCP
- Reduced counterparty risk - the risk that the other side of the transaction will default is reduced because they are replaced by one of the CCPs, both of which are well capitalised and have insurance policies in place lessening the risk of default. This reduces the risk of systemic collapse of the financial system;
- Providing total anonymity - both sides of the trade do not discover who is the original counterparty.
- Reduced administration - all trades are settled with one of the two CCPs, rather than a variety of counterparties improving operational efficiency.
- Facilitating netting of transactions - because all the trades are with a CCP, receipts and payments for transactions in the same share that settle on the same day can be netted against each other.
- Improved prices - because more participants are willing to transact anonymously, it is argued that a CCP results in improvements in price.
Order of priority
Price followed by time. The quantity or size of the order is not used to determine place on the book.
Holding where mandatory bid needs to be made
30%
DJIA divisor
changed in price DIVIDED by divisor
Conversion ratio
Nominal value/conversion price of shares
Benefits of dark pools
Reducing market impact of large orders, better pricing, lower execution costs
Lender rights
Borrower receives dividends/coupons
Benefits of corporate actions passed on to the lender
Voting rights lost (unless stock recalled in good time)
Cash versus profit
Non-cash expenses added back to profits
Any increase in current assets or decrease in current liabilities subtracted and vice versa
Capital employed
Total assets - current liabilities
How T-bills are auctioned
Tender
