JDX Bootcamp Exam

Merchant banks?

activities conducted relate primarily to international finance

What did MiFiD II do?

improve the functioning of financial markets and strengthen investor protection

What is an initial margin? Years of final phase implementation?

the amount an investor must pay in cash for securities before the broker will lend money to that investor to buy more securities 2019/20

What does TRAK stand for? What does word mean?

Transparency- obligation to share information Responsibility- Accountability- ultimately answerable for an activity or decision Knowledge- whole market has access to the same information and prices

What is front office?

client facing part of bank-- generate revenue - IB, S&T, research, cap markets, PWM

What is the EGRRCPA? What year and what did it do?

economic growth, regulation relief, and consumer protection act 2017/18 -relax requirements laid out in Dodd-Frank

what did Dodd-frank do?

enforcing transparency and accountability

Clearing banks?

post trade activity that aims to reduce risk and exposure to a counterparty's default

Volcker rule?

prohibit banks from conducting certain investment activities eliminate banks exposure to high risk assets/trading strategies

What did ICB Ring Fencing do?

protect UK retail banking from shocks originating elsewhere in the group and in the global financial markets

Public trading?

recognized market

What did the EMIR do?

reduce systemic counterparts and operational risk and help prevent future financial system collapses

what did Basel III do?

strengthen regulation, supervision and risk management of banks

OTC?

Over the counter, bilateral contract between two counterparties

Why are banks important?

- Provide liquidity - Gov can raise capital by selling gov bonds - Maintain value of these assets by selling on secondary market

What are the different types of banks?

- Retail - Investment - Merchant - Clearing - Central

Three main objectives of financial regulators?

- maintain confidence in the financial system - contribute to the protection and enhancement of stability of the financial system - secure the appropriate degree of protection for consumers

5 roles of operations?

- manage transactions - deliver business strategy - adhere to regulatory requirements - reduce risk - enhance the client experience

The Prudential Regulation Authority has two objectives?

- promote the safety and soundness of financial firms - contribute to the securing of an appropriate degree of protection for policyholders

The Financial Conduct Authority has three main objectives?

- protect consumers - enhance the integrity of the UK financial system - help maintain competitive markets and promote effective competition in the interests of consumers

Investment banks?

-assist corporations and governments to issue securities -provide advice to companies involved in mergers and acquisitions

Central banks?

-control supply and value of a nation's currency -responsible for the formulation of monetary policy and the regulation of member banks

Retail banks?

-deal directly with consumers -services offered include deposits, mortgages, debit/credit cards

What 4 things factor into Cost of Implementation?

-introduction of new systems -costs of consultants for project -ongoing support not just on-off implementation -banks have teams dedicated purely to regulation

How much money spent on Gov bailouts? UK and US?

500billion euros $700 billion

what is a derivative?

A financial product that derives its value from and is dependent on the value of an underlying asset, such as a commodity, currency, or security

IBOR is being replaced by what? What year?

Alternate reference rates (ARR) (geographic specific) 2021

6 core functions of operations?

Confirmations Settlements client relationships controls change clearing

Two sides of regulation?

Consumer Protection Cost of Implementation

4 stages of dividend pay-out timeline What do each mean?

Declaration date- announcement firm will pay dividends Ex-dividend date- date on which investors are cut off from receiving dividend Holder-of record date- date on which stockholders entitled to receive dividend are recognized Payment date- date which dividends paid out

what is EMIR? what is its purpose? 4 mandates?

European Market Infrastructure Regulation -regulation of over-the-counter derivatives -client classification -risk mitigation -reporting -clearing

Difference of forward vs future?

Future bought and sold on organized exchange

Middle office?

Governs the banks-> manages risk, calculates profits and losses - risk managers - compliance and legal

What effect did the crisis have on rest of world?

Lack of trade commodities pricing/exports stock repatriations drying credit flows

Two critical ways IBOR replacement will impact global financial system?

Legacy contracts will still reference the index after the 2021 deadline ARRs and IBORs are distinctly different - ARRs based on actual overnight transactions and secured by collateral while IBORs are not

Utility functions of operations?

Onboarding/KYC adhering to regulatory changes reference data reconciliations

What is MiFID?

Markets in Financial Instruments Directive

first lender to file for bankruptcy in financial crisis?

New Century Financial (2007)

Dodd-Frank Act? Goals/purpose?

Obama administration -aims to ensure all OTC derivatives are traded on electronic platforms or exchanges and are cleared through a Central Clearing party (CCP) and are reported to a trade repository -establish financial stability/whistleblower program -regulatory oversight bodies

Two types of shares? description

Ordinary- lower priority, voting rights, only receive dividends at discretion of company's management Preferred- no voting rights, pay fixed dividend, entitle owner to capital gains if they increase in value

Back office?

Provide all business functions related to the banks day-to-day running - operations - technology

ETD? What are they?

exchange traded derivatives

What is banking?

financial institution licensed to receive deposits and make loans. Banks also provide financial services, such as WM, currency exchange, and safe deposit boxes

Private placement?

non-public offering of shares to a small number of selected investors

Problems with OTCs?

not cleared -> credit risk lack of regulation non-standardization-> custom contracts-> harder to group

Critical issues likely faced by firms transitioning to ARRs?

regulatory uncertainty operations/tech upgrades recalibration of models lagging liquidity renegotiations of existing contracts dispute resolution lack of global coordination new accounting guidance lack of term rates an unclear future