Technology in Investment - Chapter 7

Question 1

What is chapter 7?

Answer 1

The role of the Financial Control Department (FCD)

Question 2

What does FCD stand for?

Answer 2

Financial Control Department

Question 4

What is the core function of an Financial Control Department (FCD)

Answer 4

To manage the financial resources of the business.

Question 5

What are the 5 sub-departments of the Financial Control Department (FCD)

Answer 5

Management Reporting
Statutory Reporting
Regulatory Reporting
Tax Management
Financial Operations (Payables/Receivables)

Question 6

What is the function of Statutory Reporting?

Answer 6

Reports the P&Ls and the balance sheets to internal and external audit

Question 7

What is the function of Regulatory Reporting?

Answer 7

Produces the financial and statistical returns demanded by the firms regulator

Question 8

What is the function of Tax Management ?

Answer 8

Minimizing tax liabilities

Question 9

What is the function of Financial Operations?

Answer 9

Pays staff and suppliers. Ie manages costs

Question 10

What is a corporate general ledger system?

Answer 10

A system used by the FCD to record all assets, liabilities, income and outgoings

Question 11

If 5 developers are working on a settlement system, to which department will the cost be sent to?

Answer 11

Settlement team

Question 12

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?

Answer 12

60% settlement team, 40% to the ‘General’ technology costs

Question 13

For an mid-size firm working out solely out of the UK, what four trading systems will they use?

Answer 13

Equities Trading System
Bond Trading System
FX & Money Market Trading System
Derivatives Trading System

Question 13

What is a regulatory accounting system

Answer 13

This system will be used to calculate the financial information that needs top be sent to the regulator

Question 14

Equities trading system - 4 impacts

Answer 14

Calculating commissions
Trade processing errors
Human error
Technical error

Question 15

-Bond trading system - 3 Impacts

Answer 15

Interest % error
Human trade errors.
Technical errors

Question 16

FX and Money market trading system - 3 impacts

Answer 16

Calculating trade proceeds and interest rates
Human errors
Technical errors

Question 17

Derivatives trading system - 3 impacts

Answer 17

Accuracy of market and reference data
Human error and technical error

Question 18

What type of analysis is used in the Derivatives Trading System?

Answer 18

What-if analysis

Question 19

When trades are executed across the four systems in the FCD, where are they forwarded to and in what way?

Answer 19

the trade details are forwarded to the main settlement system – usually electronically and in real time.

Question 20

What are the two development impacts on the technology department from the FCD?

Answer 20

For general ledger all systems must be continually enhanced
Interfaces between systems need to be maintained to be robust, automated & valid

Question 21

What is the Support impact on the technology department from the FCD?

Answer 21

Fixing complex errors within the General Ledger System

Question 22

What is another name for the general ledger

Answer 22

Nominal ledger

Question 23

What kind of bookkeeping convention does The general ledger system use?

Answer 23

Double-entry bookkeeping convention

Question 23

What 3 key informations should be held in a technology system that supports a general ledger account

Answer 23

Reference data items Balance Information items Transaction Information items

Question 24

What is the accounting equation for calculating Shareholders equity?

Answer 24

Assets - Liabilities = Shareholders equity

Question 24

What is double entry bookkeeping

Answer 24

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.

Question 24

What four attributes will be held in the system against reference data items?

Answer 24

1. A unique alphanumeric code to identify the account. 2. The name of the account. 3. A code to represent the type of the account, ie, bank account or expense account. 4. The identity of the currency in which postings are made for this account.

Question 25

What four attributes will be held in the system against reference data items?

Answer 25

1. The opening balance of the account. 2. The date of the opening balance. 3. The closing balance of the account. 4. The date of the closing balance.

Question 26

What type of convention does Stock record use?

Answer 26

Double Bookeeping

Question 27

What is the difference between Bookkeeping in a stock record and a general ledger system?

Answer 27

GLS is for cash transaction and balances Stock Record is for stock quantities and balances

Question 28

What is a long position in terms of general ledger structure?

Answer 28

More shares purchased then sold

Question 28

What is a Short position in terms of general ledger structure?

Answer 28

Less shares purchased then sold

Question 29

What eight attributes will be held in the system against reference data items?

Answer 29

1. Transaction date 2. Value date 3. Entry date 4. Money value 5. Description of transaction 6. Code to represent type of transaction 7. A configuration origin code 8. A unique reference number

Question 30

Why do derivative contracts need to be revalued at the end of each business day?

Answer 30

In order that the bank can measure the market risk it is exposed to as a result of holding the position

Question 31

What is posting in terms of the general ledger?

Answer 31

The process of recording amounts as credits and debits

Question 32

The rules for deciding to which account a money amount of a transaction should be posted are held within?

Answer 32

An explosion table

Question 33

Equation for assets?

Answer 33

Assets = Liabilities + Shareholders’ Equity

Question 34

What accounts are effected by the Stock record system (4)

Answer 34

Ledger Account Book Account Depot Account Client Account

Question 34

Specialist reconciliation systems are primarily developed to compare settlement records with who?

Answer 34

Front office systems and externally transmitted transaction details

Question 35

What are the 6 columns in an explosion table?

Answer 35

Transaction type Operation Amount code Account type Market code Account code

Question 36

A stock record is a component of what other system?

Answer 36

Main settlement system

Question 37

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