Wrong answers Flashcards

Question

NFA CFTC ESMA

Answer 1

NFA = national futures association - self reg orginisation or US futures. mandatory for any brokers in US - independt no ties to specific marketplace CFTC - commodities futures trading comission - independent agency to issue forex regs for financial markets in US WSMA - european secs markets authority 0 independent EU authority promotes alignment between regs in EU

Answer 2

commercial banks, instit investors or large corporate depositing at least 500k for term of 1 night - 1 yr

Answer 3

3% interst in form of voting rights for PE fund manager = 5% voting rights

Answer 4

cleaning and settlement T+3 or less frontier = t+7 formal stock regulatory authorities high income economy(measured by world bank GNI per capita)

Answer 5

sale involves issuing house subscription does not issuing house usually IB both @fixed prices

Answer 6

= price of warrant + exercise price - share price

Answer 7

money laundering regs are useless issuing company has probs paying divi physical security of shares v important - increases cost

Answer 8

persons: intermediaries e.g. LSE member firms, registered charities and gifts instruments: gilts, non convertible loan bonds (£), bearers stocks, foreign registered stocks, rights issues, CFDs, some derivatives, ETF

Answer 9

riding yield curve - upwards sloping - buy bonds with mats longer than investment horizon, hold to end of period then sell anomaly swtiching - switch between bonds with similar characteristics but prices/yields our of line -- substitution switches - differ only in terms of price and yield --pure yield pickup switch - switching based on increased yield to maturity policy switching - switch between 2 diff bonds to take advantage of anticipated changes in rates, rating, sector inter market spread switch - corp to gov (flight to quality), gilt to corp if yield difference is excessiv

Answer 10

immunization/duration matching - matches price and reinvestment rate matched at point of duration to libaility CF matching - bond redemption proceeds meet liability as it falls due combination matching - mixture of CF matching in short term and immunisation in long term

Answer 11

synthetic agreement for forward exchange - variation on short term currency swap - no actual exchange of principal at inception or nat - basically a CFD on notional cash sums

Answer 12

global - 1 stop shop across range of foreign markets sub-custody - appointing of local agent to global custonian - lower credit rating than global and regional local custodian = country specialist regional custodian - multiple markets in a region -mid range between local and gloal in terms of benefits

Answer 13

straight bond + embedded option to convert into equity of company other than issuer (usually subsidiary)

Answer 14

ABS = debt secured against a pool of assets SPV sits between lender (for mortgages) and investment company) and create Asset backed bond which they sell to bank bank can then issue these bonds - does not appear on the balance sheet of bank bankcrupty remote - since SPV is stand alone with pool of assets to service debt

Answer 15

lead manager: aka lead underwirters - given responsibility to lead syndicate and coordinate issuance of secs underwirter: firm who guarantees min level of proceeds from a share issue - will take onto own books then sell to market if fails to be taken up will purchase " discount ussuing house - invites apps from public at higher price than they paid the issying company syndicate - group of investment banks and stockbrokers who collectively issue secs of a company sponsor - may be same comp and lead manager asesses suitability for listing asesses best method of bringing comp to market coordinates prospectus production corp broker - facilitates marketing of shares

Answer 16

sponsor - coordinates production legal advisor - ensures relevant matters are covered accountants - validates financial statements

Answer 17

subscription = straigh to investor - will be knowledgable company e.g. ITC sale = via an issuing house to investor

Answer 18

conditions : - pub company -freely transferable shares with pre emptions rights - 25% free float limit of 30% ownership (not hard) -min market val 700k eq, 200k debt -3 years audited accounts - 12 months working cap continuing: - disclosure of price sensitive info through RIS

Answer 19

Nom advisor - applies to LSE Broker - liquidity provider must maintain both shares susspended if either lost and removed from AIM if not replaced in a month conditions: accounts and additional reqs for yound companies continuing reqs: must disclose info through RIS

Answer 20

price weighted - assumes 1 share per comp + biased towards higher share prices e.g. DJIA value weighted (market cap) - biases towards large companies SP500, NASDAQ, FSTE100

Answer 21

adjusts price weighted index for bonus issues, splits, consolidations such that events dont alter numerical val of DJIA DJIA = sum of component stocks/ dow divisor currently a dow multiplier

Answer 22

inflation indices Gilts use 3 months prior RPI except those issued pre jun 05 which use 8 months prior RPI = UK retail PI = 500 goos and services excludes top 4% earning households arithmetic avg RPIX = -mortgage repayments RPIY = - mortgage repayments and VAT CPI = globally harmonised index, excludes housing costs, geometric avg, used by MPC, all priv households RPI typically higher than CPI

Answer 23

- issued on a scheduled funding basis shelf registration - allows several to be authorised under one registration - letting company roll out issues over next 2 years 2- 10 yrs

Answer 24

an MTF without any reqs to fulfil MIFID transparency XC traded liquidity with OTC confidentiality Treated as MTF/OTF if volumes are huge

Answer 25

MTF - crossing network for equities OTF - crossing network for bonds both are alternative to XCs

Answer 26

Price of bond/no. of shares bond is worth = price per share of bond price per share of bond - market price /market price 125/50 = 2.5 2.5-2.1 = 0.4 0.4/2.1 = 19% =answer

Answer 27

Companies Act FCA reqs - e.g. transparency rules LSE

Answer 28

have price and time limit sell 1000 shares at 360pby next tues max time limit = 90 days can be partially filled removed at end of trading day if no time limit oly orders displayed on SETS order book

Answer 29

type of limit order hides size of large order to limit market impact executes in tranches

Answer 30

no specified price will fill as much as poss at any available price and remainder cancelled only during automatic exc

Answer 31

only during automatic exc normally have specified price entire order executed at price or better or cancelled

Answer 32

only during automatic exc executes as much of trade as poss then eliminates rest has set price

Answer 33

central counterparty service that can be provided by trading system - e.g LCH for SETS assumes responsibility for settling with each counterparty - buyer and seller remain anonymous - helps reduce counterparty risk - improvement in price

Answer 34

= debt/equity

Answer 35

admission to listing by FCA admission to recognised stock exchange e.g. LS=E

Answer 36

set up for pre specified amount of time - usually 5-10 years then wound up (increasing risk) zero divi pref shares - cap growth @ pre established redemption price income shares - entitled to most of income generated from assets of trust, some cap protection annuity income shares - v high and rising yield with baso no cap protextion ordinary income shares - high income and share of remaining assets after prior ranking shares capital shares - entitled to remaining assets on wind up - v high risk

Answer 37

total assets/total equity

Answer 38

market cap must be 700k+, with at least 25% free float market val of bond issues must be 200k+ all secs must be freely transferable any subs issue of ordinary shares must be made to existing shareholders 1st unless pre exemption resolution no holde rover 30% 3 years of audited accounts must disclose annual accoutns with 4 months of end of FY

Answer 39

= £coupon x 1/r x [1-1/(1+r)^n)] +NV/(1+r)^n] or discount back cash flows usuing CPV = FV/(1+r)^n

Answer 40

unspon = issued by depositary bank with no involvement by issuer largely OTC traded some shareholder benefits dont apply

Answer 41

tactical = shorter term = high interest, over night deposit facility leading high rated banked strategic - investments in cash and near cash money market instruments or funds

Answer 42

auction - non IL gilts, T bills competitive pricing - pay bid price tender - IL gilts, corp bonds, US gov bonds - compet auction ranked by price everyone pays lowest successful bid

Answer 43

compet - primary dealers via GEM phone line min bid = 1mn NV, 500k NV for T bills pay bid price if successful non compet - anyone registered with DMO ax bid = 500k - bid for NV not for price pay vol weighted avg of compet bid

Answer 44

bid to cover ratio calculated 2 ways: 1. bids received/bids accepted 2. $ amount bids received/ $ accepted above 2.0 = successful

Answer 45

singple price auction - 2 options compet and non compet compet - bidder spec rate, yield or discount margin non compet - $5m max per auction and accepts rates etc of compet @close - US treasury awards all non compet bids that comply with auction rules and accepts compet bids in ascending order of rate, yields, discount argin (low to high) - until quant is filled all receive highest accepted

Answer 46

= EBIT / (equity + LT liabilities) EBIT / (total assets- current liabilitites)

Answer 47

open offer = rights issue but take it or leace it rights cannot be sold nil paid so investor cannot transfer rights

Answer 48

F/S = (1+var) / (1 +base) remember to divide annual r