Technology in Investment - Chapter 7 Flashcards
What is chapter 7?
The role of the Financial Control Department (FCD)
What does FCD stand for?
Financial Control Department
What is the core function of an Financial Control Department (FCD)
To manage the financial resources of the business.
What are the 5 sub-departments of the Financial Control Department (FCD)
Management Reporting
Statutory Reporting
Regulatory Reporting
Tax Management
Financial Operations (Payables/Receivables)
What is the function of Statutory Reporting?
Reports the P&Ls and the balance sheets to internal and external audit
What is the function of Regulatory Reporting?
Produces the financial and statistical returns demanded by the firms regulator
What is the function of Tax Management ?
Minimizing tax liabilities
What is the function of Financial Operations?
Pays staff and suppliers. Ie manages costs
What is a corporate general ledger system?
A system used by the FCD to record all assets, liabilities, income and outgoings
If 5 developers are working on a settlement system, to which department will the cost be sent to?
Settlement team
If 3 developers are working on a settlement system and 2 developers are working help desks, to which department will the cost be sent to?
60% settlement team, 40% to the ‘General’ technology costs
For an mid-size firm working out solely out of the UK, what four trading systems will they use?
Equities Trading System
Bond Trading System
FX & Money Market Trading System
Derivatives Trading System
What is a regulatory accounting system
This system will be used to calculate the financial information that needs top be sent to the regulator
Equities trading system - 4 impacts
Calculating commissions
Trade processing errors
Human error
Technical error
-Bond trading system - 3 Impacts
Interest % error
Human trade errors.
Technical errors
FX and Money market trading system - 3 impacts
Calculating trade proceeds and interest rates
Human errors
Technical errors
Derivatives trading system - 3 impacts
Accuracy of market and reference data
Human error and technical error
What type of analysis is used in the Derivatives Trading System?
What-if analysis
When trades are executed across the four systems in the FCD, where are they forwarded to and in what way?
the trade details are forwarded to the main settlement system – usually electronically and in real time.
What are the two development impacts on the technology department from the FCD?
For general ledger all systems must be continually enhanced
Interfaces between systems need to be maintained to be robust, automated & valid
What is the Support impact on the technology department from the FCD?
Fixing complex errors within the General Ledger System
What is another name for the general ledger
Nominal ledger
What kind of bookkeeping convention does The general ledger system use?
Double-entry bookkeeping convention
What 3 key informations should be held in a technology system that supports a general ledger account
Reference data items
Balance Information items
Transaction Information items
What is the accounting equation for calculating Shareholders equity?
Assets - Liabilities = Shareholders equity
What is double entry bookkeeping
Each transaction is recorded in at least two ledger accounts.
Each transaction results in at least one account being debited and at least one account being credited.
What four attributes will be held in the system against reference data items?
- A unique alphanumeric code to identify the account.
- The name of the account.
- A code to represent the type of the account, ie, bank account or expense account.
- The identity of the currency in which postings are made for this account.
What four attributes will be held in the system against reference data items?
- The opening balance of the account.
- The date of the opening balance.
- The closing balance of the account.
- The date of the closing balance.
What type of convention does Stock record use?
Double Bookeeping
What is the difference between Bookkeeping in a stock record and a general ledger system?
GLS is for cash transaction and balances
Stock Record is for stock quantities and balances
What is a long position in terms of general ledger structure?
More shares purchased then sold
What is a Short position in terms of general ledger structure?
Less shares purchased then sold
What eight attributes will be held in the system against reference data items?
- Transaction date
- Value date
- Entry date
- Money value
- Description of transaction
- Code to represent type of transaction
- A configuration origin code
- A unique reference number
Why do derivative contracts need to be revalued at the end of each business day?
In order that the bank can measure the market risk it is exposed to as a result of holding the position
What is posting in terms of the general ledger?
The process of recording amounts as credits and debits
The rules for deciding to which account a money amount of a transaction should be posted are held within?
An explosion table
Equation for assets?
Assets = Liabilities + Shareholders’ Equity
What accounts are effected by the Stock record system (4)
Ledger Account
Book Account
Depot Account
Client Account
Specialist reconciliation systems are primarily developed to compare settlement records with who?
Front office systems and externally transmitted transaction details
What are the 6 columns in an explosion table?
Transaction type
Operation
Amount code
Account type
Market code
Account code
A stock record is a component of what other system?
Main settlement system
WhatWhich of the following accounts is NOT mentioned as a type affected by postings in a stock record?
Select one:
Book Account
Client Account
Depot Account
Revenue Account
