Clearing and Settlement

Question 1

Between which parties is a sub-custody agreement binding?

Answer 1

Global custodian and sub-custodian

Question 2

Which one of the following is the normal settlement convention for a Japanese government bond?

Answer 2

T+1

Question 3

All of the following are true of the impact continuous-linked settlement has had on the foreign exchange market EXCEPT:

Answer 3

CLS settlement members pay and receive gross via central banks

Question 4

What would standard settlement time be for a ten-year Japanese government bond?

Answer 4

Trade + 1

Question 5

Through which system do German equities settle?

Answer 5

Clearstream

Question 6

Which of the following best describes a one-stop banking service for clients that are hedge funds?

Answer 6

Prime brokerage

Question 7

What is the special ex-trading period for equities?

Answer 7

Ten business days

Question 8

Which of the following is responsible for coordinating foreign currency settlement on behalf of its members between the Bank of England and the Bank of Japan?

Answer 8

CLS

Question 9

Which two of the following provide clearing/settlement facilities for eurobond transactions?

Answer 9

Clearstream

Euroclear

Question 10

Which of the following statements about a regional custodian is TRUE?

Answer 10

Its credit rating may be higher than that of a single market custodian

Question 11

Which of the following is the settlement agency for listed French equities?

Answer 11

Euroclear

Question 12

What is the main purpose of stock borrowing from the lender’s point of view?

Answer 12

To increase the portfolio returns

Question 13

What do spot foreign exchange trades settle?

Answer 13

T+2

Question 14

When is standard settlement of gilts?

Answer 14

24 hours

Question 15

Which of the following is not a custody service?

Answer 15

Trade comparison/matching with the counterparty

Question 16

Foreign exchange trades are fed into the continuous linked settlement system. Which of the following could account for the trades not being properly settled?

Answer 16

The net funds that are due to be settled are not passed to their central bank

Question 17

What is the settlement time for German equity trades settling through Clearstream?

Answer 17

T+2

Question 18

hich ONE of the following statements about sub-custody agreements is FALSE?

Answer 18

Agreements cannot contain specific provisions, only general guidance

Question 19

The name on a register of shareholders would be:

Answer 19

Legal owner

Question 20

In a stock borrowing and lending agreement which of the following is borrower not obligated to pass back to the lender?

Answer 20

Voting rights

Question 21

The system used in FX markets to prevent cross-border settlement risk due to time differences is:

Answer 21

CLS

Question 22

Who is the beneficial owner of stock in a stock loan situation?

Answer 22

The principal trader

Question 23

When will a UK equities transaction, entered into after 5.15pm on the London Stock Exchange, normally be settled?

Answer 23

Three business days including the day of the tradeClearstream and Euroclear

Question 24

Which of the following organisations clear/settle eurobonds?

Answer 24

Clearstream and Euroclear

Question 25

An investor is considering the most cost-effective way of registering his shares. Which of the following would BEST meet his objective?

Answer 25

An omnibus account

Question 26

Special cum-bargains in equities are permitted:

Answer 26

Up to the day before payment day

Question 27

A trade takes place on 4 April, the ex-div date is 6 April. Settlement takes place after the record date. When the dividend is made, who would issue the claim?

Answer 27

Buyer's broker

Question 28

How would an international bank avoid settlement risk on a foreign exchange transaction?

Answer 28

Payment vs. payment

Question 29

What is the standard settlement period for cash settlement?

Answer 29

T+1

Question 30

Which of the following is usually a bearer instrument?

Answer 30

Eurobonds

Question 31

Which of the following is TRUE of a global custody structure?

Answer 31

The investor deals with one custodian based in the UK

Question 32

When a market maker uses a stock borrowing and lending intermediary to cover a short position by borrowing stock from a fund manager, which of the following best describes the relationship between the SBLI and their counterparties?

Answer 32

Agent with the market maker and agent with the fund manager

Question 33

Which of the following always describes the status of the person whose name is on the shareholder register?

Answer 33

Legal owner

Question 34

Your client is concerned that if they deal in foreign exchange they will be exposed if they settle the transaction but the other side settles in another time-zone. What do you tell them?

Answer 34

Their risk is reduced because you can use continuous-linked settlement

Question 35

What is the standard settlement for UK corporate bonds in CREST after the trade?

Answer 35

Two business days

Question 36

An investor wishes their broker to arrange a special-ex trade, which of the following would explain their motivation?

Answer 36

They wish to avoid additional income tax

Question 37

Which of the following helps to eliminate Herstatt risk?

Answer 37

CLS

Question 38

What is the settlement period for OATs?

Answer 38

T+2

Question 39

A nominee holder of shares is all of the following, EXCEPT:

Answer 39

Beneficial owner

Question 40

Under instructions from an issuing company that shareholders with a particular sized share holding must be held with a nominee company, which of the following would allow an investor to mandate dividends to a particular bank account?

Answer 40

Designated

Question 41

Which of the following is not a centralised depository?

Answer 41

London Stock Exchange

Question 42

A special ex-bargain allows an investor to:

Answer 42

Trade cum-dividend where the seller retains the right to the dividend

Question 43

Your client, Jenny, has stated that she does not wish to participate in an auto-stock lending programme. To comply with Jenny's wishes her shares would be held within which of the following nominee accounts?:

Answer 43

A designated nominee account

Question 44

The 'safekeeping and administration of a client's assets' best describes which of the following?

Answer 44

Global custody

Question 45

The central counterparty clearing agent for French equities is:

Answer 45

LCH.Clearnet