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CISI Intro To Securities And Investment > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

What does financial services sector do?

A

Provides link between organisations needing capital to those with capital available for investment

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2
Q

What is Global Financial Sectors Index

A

Produced by CDI (China Development Institute) to evaluate future competitiveness of major financial centres

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3
Q

What does Global Financial Centres Index consider

A

Business environment, human capital, infrastructure, financial sector development, reputation

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4
Q

What are the two areas of financial services

A

Wholesale and retail

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5
Q

What markets make up financial services

A

Equity, bond, foreign exchange, derivatives and insurance markets

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6
Q

What activities make up wholesale sector

A

Fund management, investment banking and custodian banking

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7
Q

What makes up the retail sector?

A

Retail banking, insurance, pensions, investment services, financial planning and advice

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8
Q

Who provides data from global stock exchanges

A

World Federation of Exchanges (WFE)

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9
Q

What are the largest stock exchanges in order?

A

NYSE, Nasdaq, Shanghai stock exchange (SSE), Euronext, LSE

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10
Q

What are MTFs and what do they do?

A

Multilateral Trading Facilities are systems that bring together parties interested in buying/selling financial instruments. Using matching engines or crossing networks

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11
Q

What is the purpose of bond markets

A

Allow governments/companies to raise loans or debt finance directly from investors and then facilitate secondary trading of the debt securities created

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12
Q

The type of bonds

A

Sovereign, supranational, agency, corporate bonds

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13
Q

What does the FX market do

A

Fx markets are global and facilitate trading of currencies and determine exchange rates (determined by supply and demand)

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14
Q

What is the derivative market

A

Facilitates trade of a range of complex products based on underlying instruments (currencies, indices, interest rates, equities, commodities, credit risk)

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15
Q

What is largest derivative exchange?

A

Chicago Mercantile Exchange (CME)

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16
Q

What does insurance market do?

A

Specialise in management of risk.

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17
Q

How do insurance companies make money and what is reinsurance?

A

Hope that the premiums from policies exceed claims paid out. Also invest premiums. Reinsurance is insurance for insurers and allows them to hedge risk on single policies or on group of policies.

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18
Q

Largest reinsurers

A

Munich RE, Swiss RE, Hannover RE, Berkshire Hathaway, Lloyds of London

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19
Q

Largest Insurers

A

China Life, Allianz, AXA

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20
Q

What do Retail Banks Do?

A

Provide Services such as deposits, lending, payment services, investments, pensions, insurance

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21
Q

What are savings institutions?

A

Similar to banks but specialise in savings products. Also called building societies

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22
Q

What are challenger banks?

A

Smaller banks specialising in areas underserved by larger banks

23
Q

What is peer to peer lending?

A

P2P is lending which cuts out banks as middleman. Borrowers get lower rates and lenders get improved rates in exchange for extra risk

24
Q

What is Crowdfunding and what are the three types?

A

The practice of finding a project or venture by raising small amounts of money from a large amount of people. Can be in form of donation, debt crowdfunding, equity crowdfunding.

25
Q

Pros and cons of P2P

A

Higher returns, useful when low interest rates.
However can take time before a large deposit is lent out and won’t be earning interest. Also immediate withdrawal isn’t always possible.

26
Q

What do investment banks do?

A

Provide advice and arrange finance for companies entering the stock market, issuing shares or bonds, carding out m&as. Services for those looking to invest in shares and bonds

27
Q

Services from investment banks

A

Corporate finance/advice, banking for institutions, treasury dealing, investment management, securities trading

28
Q

What are pension funds and who provides them?

A

One of the key ways individuals can make provision for retirement. Can be provided by employers or self directed

29
Q

What do insurance companies do and what do they offer?

A

Ensure risk is managed effectively. Offer products to meet range of scenarios such as payment protection for mortgages and loans. Invest premiums received.

30
Q

What is fund management?

A

The professional management of investment portfolios for a variety of institutions and private investors. Also called asset/investment management

31
Q

What do fund managers do and what are the two types?

A

Institutional or private managers. Run investment portfolios for clients and charge them a management fee and other charges

32
Q

What do the two types of stockbrokers do?

A

Arrange trades for clients. Institutional brokers execute large trades in the market. Execution only stockbrokers offer trading services to retail clients. Earn money through commission

33
Q

What do custodian banks do?

A

Banks which specialise in custody services. Look after portfolios on behalf of fund managers and companies.

34
Q

Activities of custodian banks

A

Safekeeping assets, arrange settlement, process corporate actions, provide information on companies, manage cash transactions, perform fx transactions, report to clients

35
Q

What are platforms

A

Platforms are online services used by intermediaries such as independent financial advisors (IFAs) to view and administer their clients portfolios.

36
Q

Types of platforms

A

Fund supermarkets offer wide range of unit trusts and OEICs while Wraps offer other products such as ISAs and pensions

37
Q

What are Third Party Administratiors

A

TPA undertake investment administration on behalf of other firms. Outsourcing allows a firm to focus on core areas of its business instead. TPAs can also process more efficiently/cheaply

38
Q

Who are the ICMA

A

International capital market association

39
Q

Who are the ISDA

A

International swaps and derivatives association

40
Q

Who are the ABI

A

Association of British insurers

41
Q

Who at ethe PIMFA

A

Personal investment management and financial advice association

42
Q

Who are the TISA

A

Tax incentivised savings association

43
Q

What is financial planning?

A

A professional service available to individuals and businesses who need assistance organising financial affairs to achieve their financial and lifestyle goals

44
Q

What are financial advisors

A

Professionals who offer financial advice to clients. Conduct survey of clients financial position (fact find) and make suggest appropriate action

45
Q

What is independent advice

A

Genuinely make recommendations based on fair analysis of all products on the market and is unbiased

46
Q

What is restricted advice

A

Only giving advice on your own products and services

47
Q

What is execution only

A

Customer asks to buy/sell without being advised by the firm. Firm has to make it clear they gave no advice and not responsible for assessing the products suitability

48
Q

What is robo advice

A

The application of technology to the process of providing financial advice without an advisor.

49
Q

How does robo advice work

A

Algorithms score investments based on information provided. Presents an investment strategy to client usually on passive funds such as ETFs

50
Q

What is fintech

A

Use of technology to enhance and deliver superior financial service product offerings

51
Q

Benefits of fintech

A

Allows firms to keep pace with market and win new business by being the first to offer a product. Data collection and faster onboarding of clients

52
Q

What are ESG factors

A

Environmental social and governance factors

53
Q

Importance of ESG and who decides this

A

MSCI determines ESG Rating. Attracts ESG conscious investors and firms who want to deal with ESG firms

CISI Intro To Securities And Investment (2 decks)

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