Professional Documents
Culture Documents
Certificate in Alternative
Investment Industry
Ops Curriculum
2014 Marcum Tech Ranked 49th Fortune’s No. 26 in the Best Forbes America’s
Top 40 winner in the 100 Fastest Growing Top 100 Outsourcing Best Small
Software category Companies Provider Companies
Course Objective
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Global Capital Market
Capital markets are financial markets for the buying and selling of long-term debt
or equity-backed securities : Primary Market & Secondary Market.
Market Participants :
Clearing House
Stock Exchange
Depository
Transfer Agent
Investor
Trading Participant
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a. Investment Manager (IM)
In HF context, a FIRM that provides Investment Management
Administrator
Current Investor expectations:
To Focus more on Investment discipline
Meet Investor demand for reporting and Transparency
Build Stable Management team with full range of skill sets
Demonstrate high quality infrastructure
Keep abreast of Public policy and regulatory requirements
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b. Administrator
A Financial Services company that is expected to provide
# Accounting
# Admin Services
Administrator
# Middle and Back Office Services
Services Offered:
Operational Support
Fund.
PB have cash cut-off time which require attention
Trading :
Trade Origination / Order Origination
Trade Execution
Trade Enrichment
From the Trade
Origination to the
Settlement Operations :
Trade Validation
Trade Confirmation
Clearing & Settlement
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Order/Trade Flow in Automated
Environment
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Order Origination
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Execution of Trade
When both the parties agree to the details of the trade and are willing to
enter into the deal, the trade gets executed.
Both buyer and seller now enters in to contract which has legal obligation
on all the parties involved in trade.
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Allocation of Trade
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Confirmation of Trade
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Post-Trade Changes
Amendment/Cancellation/Rebooks
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Clearing and Settlement
The clearing process involves two primary tasks
Comparison (matching of trades)
Settlement (delivery of securities or book entry)
Handled @ Back Office
Confirmation (First Step)
Trades are said to be cleared when the counterparties’ records are
identical
Netting of trades
Trade settlement occurs when buyers receive their securities and when
sellers receive payment for their securities
On who’s name the electronic share certificates are held at Depository?
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Equity
Equities
Financial instrument representing a percentage of ownership in a corporation with
a share in the ongoing success of the enterprise.
Preferred Stock – equity security with many fixed income characteristics but
shareholders are not entitled to voting rights
Cumulative Preferred Stock – stock dividends can be accumulated for later payment
Convertible Preferred Stock –investor can convert the preferred stock to common
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Purpose of Corporate Action
Influence the Share Price: • If the price of a stock is too high or too low, the liquidity
of the stock suffers.
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Difference in Rights Offer and Dividend
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Stock Split & Reverse Stock Split
Increase / Decrease in the number of outstanding shares of a company’s stock, such that
Effects of Split
Number of share increases/decreases to the extent of
Terms(ratio)
Cost of stock decreases/increases to the extent
Terms(ratio)
Overall value remains the same
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Difference in Spin-Off and Merger /
Acquisition
Spin-Off Merger / Acquisition
• The separation of a subsidiary • Acquisition:- An acquisition is
or division of a corporation the purchase of one company by
from its parent company. another company. An acquisition
may be private or public,
• Issuing shares in a new depending on whether the
corporate entity. acquiree or merging company is
or isn't listed in public markets.
An acquisition may be friendly or
• A large company may require hostile.
to separate a line of business
or create a separate entity.
• Merger :- Two companies merge
together to form one single
entity.
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Difference in Bonus and Change of Name
/ Identifier
Bonus Change of Name / Identifier
• Very popular way of • Change in the Company’s
rewarding the Name, Identifier and Ticker
shareholders as well as from original to new Name,
increasing the share Identifier and Ticker.
capital.
• This has No Effect on:
• Its done by capitalizing the • Cash or Price
reserves created out of • Position
profits.
• Par Value & Market Value.
• Shareholders receive
additional free shares in
proportion to their holding.
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Bonds
Definition of Bond
Bond is a debt security, in which the authorized issuer owes the holders a debt
and is obliged to repay the principal and interest (coupon) at a later date,
termed maturity.
Bonds are generally issued for a fixed term (the maturity). For example 10
years.
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Features of Bonds
Issue Price :- the price at which investors buy the bonds when they are first issued
Maturity date :- the date on which the issuer has to repay the nominal amount.
Coupon :- the interest rate % that the issuer pays to the bond holders.
Coupon dates :- the dates on which the issuer pays the coupon to the bond holders, e.g. quarterly, semi-annually, annually.
Clean Price: Current traded price. (Price is always calculated on a percent basis)
Accrued Interest: Coupon rate % * No of days from the Prev coupon paid / Day Count Denominator
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REPO & REVERSE
REPO
Difference in Repo and Reverse Repo
Reverse-Repo Repo
• Reverse Repo is the same • Repo is a money market instrument
repurchase agreement from the involving 2 parties. One party “sells”
buyers viewpoint. bonds to the other while
simultaneously agreeing to
• On maturity date buyer delivers repurchase them or receive them
the Bonds to the seller and in back at a specified future date.
turn receives cash (includes sale
price - interest) • On maturity date seller receives the
Bonds and pays cash to the buyer
(includes sale price + interest)
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Why Repo & Reverse Repo…
• Financing / Funding
REPO • Flexibility of trade
• Efficient use of collateral.
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MBS/ABS
What Is a Mortgage?
A mortgage represents a loan on a property/house that has to be paid over a
specified period of time.
What is securitization ?
Securitization is the process by which assets are pooled together into one security.
Securitization allows firms to convert small, illiquid assets, primarily loans, into a large
security that can be easily sold into the capital markets.
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Mortgage Process
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Mortgage Backed Securities
Mortgage backed securities are created when mortgage loans are packaged, or
“pooled,” by issuers or servicers for sale to investors. As the underlying mortgage loans
are paid off by the homeowners, the investors receive payments of interest and
principal.
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Asset-backed Security – ABS
A financial security backed by a loan, lease or receivables against assets other than
real estate and mortgage-backed securities. For investors, asset-backed securities
are an alternative to investing in corporate debt
An ABS is essentially the same thing as a mortgage-backed security, except that the
securities it backs are assets such as loans, leases, credit card debt and so on, and not
mortgage-based securities.
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Futures, Options &
CFD
Derivatives
Derive value from underlying Assets Participant in derivative Market
Stocks Hedgers
Bonds Speculators
Currencies Arbitrageurs
Commodities
Derivatives
Market
Exchange OTC
Traded
Derivatives
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Types Of Futures & Options
Futures Options
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Features of Futures Contract
Price agreed today with delivery & Payment occurring on future date
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Features of Options Contracts
Pay Premium
Buyer(Holder)
Margin Requirement – No
Receive Premium
Seller (Writer)
Margin Requirement – Yes
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Features of CFD
Allows investors to take long or short positions
No fixed expiry or contract size
Owning a CFD similar to own a share
Benefits such as capital gains & Dividends
Prominent markets
UK
Germany
Australia
Canada
Italy
Singapore
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Futures v/s Options v/s CFD’s
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Foreign Exchange
What is Foreign Exchange
“ The foreign exchange (FX) market is where world currencies are bought and sold
against one another.
Organizational framework
The market runs 24 hours a day
Actual currency are not physically traded
The FX market is an over-the-counter (OTC) market
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Types of Foreign Exchange
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Questions?
Thank you!