2 - practice q Flashcards
In liquidation, what do preference shareholders have priority of over ordinary shareholders and what is normally not paid out?
Priority over repayment of nominal value
Preference dividends not usually paid
What is grey market trading?
Depositary receipt created leads to depository bank receiving notification in future that shares will be placed on deposit.
If the bank holds cash as collateral, even though shares are not yet on deposit, the bank can create and sell the receipt.
So investors buying a receipt that entitles them to share benefits that in future will be held on deposit to them.
How long can grey market trading happen?
Depositary receipt can be treated this way for up to 3 months.
Then the actual purhcase of underlying shares has to happen.
Also called pre-release
Features of bearer securities
anonymous
freely transferable
no register maintained of legal title/proof of title is in physical posession
What is issued in bearer form and what is not?
UK shares not normally
Eurobonds, money market instruments, bank notes are.
What is the tear-off slip?
This when instruments issued in berer form have these attached which basically represents a dividend/interest payment.
On due payment date, investor tears off the slip (the coupon) and submits to payin agent.
What is stub/talon
Once all coupons have been used up when invstors tear off slip of a bearer doc, they submit this
It essentially is a request to additional coupons
Who are bearer documents placed with
High security depositaries (immobilised)
In oder to guard against theft
How does a bearer security differ from registered security in terms of proof of legal title?
Bearer: proof of legal title is achieved by having physical possession of the security
Registered: legal title is proved by the security being registered in the owner’s name
What is commercial paper?
Short-term unsecured debt financing issued by a company
Generally no interest paid so issued at a discount (like T bills)
What are pre-emption rights?
Right that a shareholder may benefit from on an issue of new shares or transfer of shares.
Right to purhcase shares being issued/transferred
Features of medium-term notes?
Coupon rate and maturity set to market demand
How often are 10-yr Treasury notes usually issued?
On a quarterly basis
Clean/dirty wrt to Eurobonds quotes and settlements
Bonds quoted as clean
Settled as dirty
Bond spread definition?
Difference between the yield on a given bond and that of the equivalent govt bond of the same maturity
Lifetime of Japanese superlong bonds?
20 years
Compare risk betwen mezzanine debt and subordinated debt and why?
Mezzanine debt is higher risk, so higher interest rate.
This is because mezzanine debt usually has equity participation - like warrants or rights to convert to equity.
What are credit enhancements?
Tools used by an issuer to enable bonds to be more highly-rated.
Includes guarantees from other group companies.
What kind of coupons do Eurobonds have?
Fixed coupons
Issuing US treasury bonds - what is the method of pricing used
Tender style - price of issue is assessed tender-style with investors paying a common strike price
What does a sinking fund involve?
Issuer setting aside a certain amount each year
May be an approach combined with a bond issue that is callable.
How often do Eurobonds pay interest?
Gross
Annually
How soon should Eurbond trades be reported post publication and post transaction
To be reported in TRAX system within 30 min for publication
Transaction by 10pm on the day of the trade
What is Federal Home Loan Mtg Corp known as?
Freddie Mac
