Details

Financial Markets Operations Management

The Wiley Finance Series 1. Aufl.

von: Keith Dickinson
63,99 €
Verlag:	Wiley
Format:	EPUB
Veröffentl.:	20.01.2015
ISBN/EAN:	9781118843901
Sprache:	englisch
Anzahl Seiten:	480

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Beschreibungen

Titelbeschreibung

A comprehensive text on financial market operations management Financial Market Operations Management offers anyone involved with administering, maintaining, and improving the IT systems within financial institutions a comprehensive text that covers all the essential information for managing operations. Written by Keith Dickinson—an expert on the topic—the book is comprehensive, practical, and covers the five essential areas of operations and management including participation and infrastructure, trade life cycle, asset servicing, technology, and the regulatory environment. This comprehensive guide also covers the limitations and boundaries of operational systems and focuses on their interaction with external parties including clients, counterparties, exchanges, and more. This essential resource reviews the key aspects of operations management in detail, including an examination of the entire trade life cycle, new issue distribution of bonds and equities, securities financing, as well as corporate actions, accounting, and reconciliations. The author highlights specific operational processes and challenges and includes vital formulae, spreadsheet applications, and exhibits. <ul> <li>Offers a comprehensive resource for operational staff in financial services</li> <li>Covers the key aspects of operations management</li> <li>Highlights operational processes and challenges</li> <li>Includes an instructors manual, a test bank, and a solution manual</li> </ul> This vital resource contains the information, processes, and illustrative examples needed for a clear understanding of financial market operations.

Inhaltsverzeichnis

Preface xix Acknowledgements xxiii Part One Chapter 1 Introduction to Operations 3 1.1 Introduction 3 1.2 Organisational Structure of an Investment Company 5 1.2.1 Front Office 5 1.2.2 Middle Office 6 1.2.3 Back Office/Operations 9 1.3 Operations’ Relationships 10 1.3.1 Clients – External 10 1.3.2 Clients – Internal 11 1.3.3 Counterparties 11 1.3.4 Suppliers 12 1.3.5 The Authorities 12 1.4 Other Business Functions 13 1.5 Summary 15 Chapter 2 Financial Instruments 17 2.1 Introduction 17 2.2 Why Do We Issue Financial Instruments? 18 2.3 Money Market Instruments 19 2.3.1 Euro-Currency Deposits 19 2.3.2 Certificates of Deposit 23 2.3.3 Commercial Paper 23 2.3.4 Treasury Bills 25 2.4 Debt Instruments 26 2.4.1 A Bond Defined 26 2.4.2 Bond Issuance 27 2.4.3 Types and Features of Bonds 27 2.4.4 Other Key Characteristics of Bonds 28 2.4.5 Types of Bond 29 2.4.6 Form of Bonds and Interest Payment 30 2.4.7 Maturity and Redemption Provisions 31 2.4.8 Calculations 32 2.4.9 Accrued Interest 33 2.4.10 First Short Coupon 37 2.4.11 First Long Coupon 38 2.5 Equity Instruments 38 2.5.1 Equity Defined 38 2.5.2 Classes of Equity 41 2.5.3 Equity Issuance 43 2.5.4 Pricing and Calculations 44 2.5.5 Examples of Local Taxes 45 2.5.6 Disclosure 45 2.5.7 Summary of Cash Market Instruments 46 2.6 Derivative Instruments 47 2.6.1 Introduction 47 2.6.2 Definitions 48 2.6.3 Derivative Usage 49 2.7 Exchange-Traded Derivatives 52 2.7.1 Introduction 52 2.7.2 The Role of the Derivatives Exchanges 53 2.7.3 Major Derivatives Exchanges 53 2.7.4 Open Interest and Trading Volumes 56 2.7.5 Futures 58 2.7.6 Options 64 2.7.7 Summary of Exchange-Traded Derivatives 71 2.8 OTC Derivatives 71 2.8.1 Introduction 71 2.8.2 Forwards 72 2.8.3 Swaps 76 2.8.4 Summary of OTC Derivatives 80 2.9 Summary 81 2.9.1 Financial Products in General 81 2.9.2 Cash Markets 81 2.9.3 Derivatives Markets 81 Chapter 3 Data Management 83 3.1 Introduction 83 3.2 Importance of Reference Data and Standardisation 84 3.2.1 Introduction 84 3.2.2 Basic Securities Transactions 84 3.3 Types of Reference Data 86 3.3.1 Required Reference Data 86 3.3.2 Data Requirements – Securities 87 3.3.3 Data Requirements – Counterparties and Customers 91 3.3.4 Data Requirements – Settlement Information 92 3.3.5 Sources of Reference Data 93 3.4 Data Management 94 3.4.1 What is Data Management? 94 3.4.2 Approaches to Data Management 94 3.4.3 Data Processing 95 3.5 Legal Entity Identification 95 3.5.1 Background to Legal Entity Identification 95 3.5.2 The “Legal Entity” 96 3.5.3 The Global Legal Entity Identifier System (GLEIS) 96 3.5.4 LEI Structure 97 3.6 Summary 99 Chapter 4 Market Participation 101 4.1 Introduction 101 4.2 Market Players 102 4.2.1 Retail Clients 102 4.2.2 Institutional Clients 103 4.2.3 Banks 115 4.2.4 Sell-Side Intermediaries 126 4.2.5 Market Regulators and Market Associations 129 4.3 Market Structure 131 4.3.1 Introduction 131 4.3.2 Regulated Markets 131 4.3.3 Alternative Trading Venues 135 4.3.4 Over-the-Counter Market 136 4.4 Summary 137 Part Two Chapter 5 Clearing Houses and CCPs 141 5.1 Introduction 141 5.2 Overview of Clearing and Settlement 142 5.3 The Clearing House Model 143 5.4 The Central Counterparty Model 145 5.4.1 Risk Management 147 5.5 Features of CCPs and Clearing Houses 148 5.5.1 The Committee for Payment and Settlement Systems’ Statistics 148 5.6 Summary 150 Chapter 6 Securities Depositories (CSDs and ICSDs) 151 6.1 Introduction 151 6.2 Historical Context 151 6.3 Definitions 154 6.3.1 Domestic (Local/National) CSDs 154 6.3.2 International CSDs 154 6.4 Central Securities Depositories 154 6.4.1 Features of CSDs and ICSDs 154 6.4.2 Functions of CSDs 155 6.4.3 The Changing World of CSDs 158 6.4.4 CSD Links and Interoperability 161 6.5 International Central Securities Depositories 163 6.5.1 Background 163 6.5.2 Features of the ICSDs 164 6.5.3 Clearstream Banking Luxembourg (CBL) 164 6.5.4 Euroclear Bank (EB) 165 6.6 Linkages – Exchanges, Clearing Systems and CSDs 167 6.6.1 United States of America 168 6.6.2 Europe 169 6.6.3 Rest of the World 170 6.7 CSD Associations 171 6.7.1 Introduction 171 6.7.2 Americas’ Central Securities Depositories Association (ACSDA) 171 6.7.3 Asia-Pacific CSD Group (ACG) 171 6.7.4 Association of Eurasian Central Securities Depositories (AECSD) 172 6.7.5 European Central Securities Depositories Association (ECSDA) 172 6.7.6 Africa and Middle East Depositories Association (AMEDA) 172 6.8 Summary 173 Chapter 7 Securities Clearing 175 7.1 Introduction 175 7.2 Generic Clearing Cycle 176 7.2.1 Trade Capture 176 7.2.2 Trade Enrichment and Validation 177 7.2.3 Trade Reporting 177 7.2.4 Confirmation and Affirmation 178 7.2.5 Clearing Instructions 178 7.2.6 Forecasting – Cash 179 7.2.7 Forecasting – Securities 180 7.3 Trade Capture 182 7.3.1 Dealer’s Blotter 182 7.3.2 Trade Input 182 7.3.3 Trade Output 183 7.4 Trade Enrichment and Validation 184 7.5 Regulatory Reporting 186 7.5.1 Background 186 7.5.2 Transaction Reporting 186 7.5.3 Transaction-Reporting Mechanism 187 7.5.4 Trade Repositories 188 7.6 Confirmation and Affirmation 188 7.6.1 Confirmations 189 7.6.2 Affirmation 190 7.7 Clearing Instructions 194 7.7.1 Types of Instruction 194 7.7.2 Instruction Validation 196 7.7.3 Instruction Matching 196 7.8 Forecasting – Cash 199 7.8.1 Introduction 199 7.8.2 Timing Issues 199 7.8.3 Cash Forecasting Methodology 200 7.8.4 Funding Uncertainties 201 7.8.5 Benefits of Predictive Forecasting 202 7.9 Forecasting – Securities 203 7.9.1 Introduction 203 7.9.2 Securities that are Available for Delivery 204 7.9.3 Securities that are Not Available for Delivery 204 7.10 Summary 205 Chapter 8 Settlement and Fails Management 207 8.1 Introduction 207 8.2 The Different Types of Settlement 208 8.2.1 Gross Settlement 209 8.2.2 Net Settlement 210 8.3 Delivery versus Payment 211 8.3.1 Definition of DVP 212 8.3.2 DVP Models 213 8.3.3 Settlement Instructions for DVP 214 8.4 Free of Payment Settlement 215 8.4.1 Settlement Instructions for Free of Payment 215 8.4.2 Where Settlement Takes Place 216 8.4.3 Settlement Conventions 216 8.5 Settlement Fails 217 8.5.1 Overview of Settlement Failure 217 8.5.2 Why Transactions Fail to Settle 218 8.6 The Move to Shorter Settlement Cycles 228 8.6.1 Background 228 8.6.2 Project Status 228 8.7 Summary 229 Chapter 9 Derivatives Clearing and Settlement 231 9.1 Introduction 231 9.2 Regulatory Changes 232 9.2.1 Background 232 9.2.2 Financial Stability Board (FSB) 232 9.2.3 Reform Requirements 233 9.3 Exchange-Traded Derivatives Contracts 234 9.3.1 Introduction 234 9.3.2 Derivatives Exchange and Clearing System 235 9.3.3 Give-Up Agreements 235 9.3.4 Clearing Process 236 9.3.5 Margin Calculations 237 9.3.6 Initial Margin – Eligible Assets 239 9.4 Cleared OTC Derivatives Contracts 240 9.4.1 Types of OTC Derivative that are Cleared Centrally 241 9.4.2 Trading Platforms 242 9.4.3 Trade Repositories 244 9.4.4 Central Counterparties 244 9.5 Non-Cleared OTC Derivatives Contracts 245 9.5.1 Documentation 245 9.5.2 Non-Cleared OTCD Processing 248 9.5.3 Trade Capture 248 9.5.4 Confirmation 249 9.5.5 Settlement 250 9.5.6 Collateral 251 9.5.7 Event Monitoring 254 9.5.8 Reconciliation 254 9.6 Summary 255 Part Three Chapter 10 Custody and the Custodians 259 10.1 Introduction 259 10.2 Custody 260 10.2.1 What is Custody? 260 10.2.2 Forms of Securities 260 10.2.3 Ownership Transfer – Bearer Securities 261 10.2.4 Ownership Transfer – Registered Securities 262 10.3 Holding Securities 263 10.3.1 Register in the Custodian’s Name 263 10.3.2 Nominee Account 264 10.3.3 CSD Nominee 266 10.3.4 Safekeeping Methods – Summary 267 10.4 The Custodians 267 10.4.1 Custody in a Local Market 267 10.4.2 Custody in Global Markets 271 10.4.3 Custody in the EuroMarkets 277 10.5 Target2Securities (T2S) 279 10.5.1 Introduction 279 10.5.2 Eurosystem 280 10.5.3 How T2S Will Work 281 10.5.4 Migration Plan 282 10.5.5 Further Information 282 10.6 Summary 283 Chapter 11 Corporate Actions 285 11.1 Introduction 285 11.2 Types of Corporate Action Event 286 11.2.1 Voluntary or Mandatory Events 286 11.2.2 Predictable or Announced Events 287 11.3 Participation in Corporate Actions 287 11.3.1 Fund Manager 287 11.3.2 Global Custodian 287 11.3.3 Local/Sub-Custodian 288 11.3.4 Local Central Securities Depository 288 11.3.5 International Central Securities Depository 288 11.3.6 Data Vendors 288 11.3.7 Receiving/Paying Agent 288 11.4 Entitlements, Key Dates and Claims 289 11.4.1 Entitlement 289 11.4.2 Record Date 290 11.4.3 Ex-Dividend Date 290 11.4.4 Payment Date 292 11.4.5 Claims 292 11.4.6 Key Dates for Bonds 294 11.5 Corporate Action Event Processing 294 11.5.1 Introduction 294 11.5.2 Cash Dividend 296 11.5.3 Optional Stock Dividend 298 11.5.4 Fixed-Income Bond Coupon 300 11.5.5 Floating-Rate Note (FRN) Coupon and Rate Reset 302 11.5.6 Bond Redemption 305 11.5.7 Bond Conversion 307 11.5.8 Capitalisation (Bonus) Issue 309 11.5.9 Rights Issue 310 11.5.10 Other Examples of Event Types 314 11.6 Information Flows 315 11.6.1 Introduction 315 11.6.2 The Communication Problem 315 11.6.3 Global Communication Chain 316 11.6.4 Local Communication Chain 318 11.6.5 International Central Securities Depository Chain 319 11.6.6 Summary 320 11.7 Corporate Action Risks 320 11.7.1 Introduction 320 11.7.2 Data/Information Capture Risk 321 11.7.3 Replacement Risk 322 11.7.4 Decision-Making/Election Risk 322 11.7.5 Reputational Risk 322 11.7.6 Reconciliation Risk 323 11.8 Industry Initiatives 323 11.8.1 Introduction 323 11.8.2 The International Securities Services Association (ISSA) 323 11.8.3 Giovannini Group 324 11.8.4 European Central Securities Depositories Association (ECSDA) 325 11.9 Corporate Governance and Proxy Voting 328 11.9.1 Introduction 328 11.9.2 Relations with Shareholders 328 11.9.3 Proxy Voting 329 11.9.4 Relations with Preference Shareholders 331 11.9.5 Relations with Bondholders 331 11.9.6 Company in Bankruptcy or Administration 331 11.9.7 Disclosure Reporting 332 11.10 Withholding Tax 333 11.10.1 Introduction 333 11.10.2 The Problem of Double Taxation 335 11.10.3 Double Taxation Treaties 335 11.10.4 Tax Reclaims 336 11.11 Impact on Other Departments 337 11.11.1 Introduction 337 11.11.2 Front Office 337 11.11.3 Clients 338 11.11.4 Settlements 338 11.11.5 Securities Lending and Borrowing 338 11.11.6 Reconciliations 339 11.11.7 Pricing and Valuation 339 11.11.8 Reference Data 340 11.12 Summary 340 Appendix 11.1: Corporate Action Event Type Categories 340 Appendix 11.2: Voluntary and Mandatory Events for Equities and Bonds 341 Chapter 12 Securities Financing 343 12.1 Introduction 343 12.2 Types of Securities Financing 344 12.2.1 Securities Lending and Borrowing 344 12.2.2 Repurchase Agreements 344 12.2.3 Sell/Buy-Backs 345 12.2.4 Summary of Securities Financing Transactions 345 12.3 The Players and Their Motivations 346 12.3.1 Introduction 346 12.3.2 The Buy Side 346 12.3.3 The Sell Side 347 12.3.4 Borrowing to Cover Short Positions 348 12.3.5 Borrowing Cash to Finance Inventory 349 12.3.6 Temporary Transfer of Ownership 350 12.3.7 Summary 352 12.4 Intermediaries 352 12.4.1 The Relationship between Lender and Borrower 352 12.4.2 Agent Intermediaries 352 12.4.3 Principal Intermediaries 353 12.4.4 Choices for the Lenders and Borrowers 353 12.5 Agreements and Code of Guidance 354 12.5.1 Introduction 354 12.5.2 Securities Lending Agreements 354 12.5.3 Repurchase Agreements 355 12.5.4 Code of Guidance 356 12.6 Securities Lending Lifecycle 356 12.6.1 Phase 1: Loan Initiation 357 12.6.2 Phase 2: Loan Maintenance 361 12.6.3 Phase 3: Loan Closure 367 12.6.4 Lending Fees 368 12.7 Repurchase Agreement Lifecycle 370 12.7.1 Motivations 370 12.7.2 Repurchase Agreement Types 371 12.7.3 Sell/Buy-Backs 374 12.7.4 Settlement 376 12.8 Collateral and Margin 379 12.8.1 Terminology 379 12.8.2 Types of Collateral 380 12.8.3 Repurchase Agreements (and Sell/Buy-Backs) 380 12.8.4 Securities Lending 381 12.8.5 Delivery by Value (DBV) 381 12.8.6 Repo Exposure, Haircuts and Margin 382 12.9 Default and Close-Out Provisions 384 12.9.1 Introduction 384 12.9.2 Event of Default 384 12.9.3 Consequences of an Event of Default 385 12.10 Central Counterparty (CCP) Services 386 12.10.1 Introduction 386 12.10.2 The Options Clearing Corporation (OCC) 386 12.10.3 Eurex Clearing 387 12.10.4 LCH.Clearnet 387 12.10.5 Clearstream Banking Luxembourg (CBL) 388 12.10.6 Euroclear Bank 388 12.11 Summary 389 Appendix 12.1: Credit Ratings – Long Term 390 Appendix 12.2: Delivery by Value (DBV) Class List 391 Appendix 12.3: Technology Vendors 392 Part Four Chapter 13 Accounting for Securities 395 13.1 Introduction 395 13.1.1 Accounting and Why We Need It 395 13.2 The Accounting Equation 397 13.2.1 Key Financial Statements 397 13.3 The Accounting Lifecycle for Securities 400 13.3.1 Introduction 400 13.3.2 Trade Date 401 13.3.3 Settlement Date 402 13.3.4 Revaluation 403 13.4 Gains and Losses 405 13.4.1 Introduction 405 13.4.2 Fair Value (Mark-to-Market) 405 13.4.3 Amortised Cost 407 13.4.4 Calculation Conventions 410 13.5 The Accounting Lifecycle for Derivatives 411 13.5.1 Introduction 411 13.5.2 Exchange-Traded Derivatives 412 13.5.3 OTC Derivatives 415 13.6 Summary 416 Appendix 13.1: Closing Prices for Singapore Equities (SGX) 416 Chapter 14 Reconciliation 417 14.1 Introduction 417 14.2 Importance of Reconciliation 418 14.2.1 Internal vs. External Records 418 14.2.2 Ownership vs. Location 419 14.3 Types of Reconciliation 421 14.3.1 Reconciliation Methods 422 14.3.2 Reconciliations – Worked Examples 423 14.4 Automation of Reconciliations 427 14.5 Summary 428 About the Author 429 Index 431

Autorenportrait

KEITH DICKINSON is Director of The Settlement & Management Research Consultancy Limited, Principal of Financial Markets Training Limited and a Senior Teaching Fellow at the International Business School Suzhou at Xi'an Jiaotong-Liverpool University, Suzhou. His career has spanned twenty years as an industry practitioner in operations and over twenty years in executive education and academia.

Back cover copy

Filling a gap in the literature, Financial Markets Operations Management gives operations professionals a guide for navigating the settlement and post-settlement environment for securities and derivatives. Comprehensive in scope, the text covers the trade lifecycle for these financial products from trade capture, pre-settlement and settlement through to the custody of assets and asset servicing. Written by Keith Dickinson – a noted financial academic and practitioner – this important resource offers an understanding of operations as it pertains to financial instruments, data management, and various types of organisations. Financial Markets Operations Management reviews the organisational structure of a typical investment company as well as the internal and external relationships that operations typically manage. The text explains the essential operational features and explores the transaction calculations, including accrued interest for bonds. The author then explores how the various intermediaries and market infrastructures enable lenders and borrowers to operate. The section on the post-trade processing phase contains the essentials on the clearing systems and distinguishes between clearing houses and central counterparties. Step by step, the text follows the initial post-trade processes of clearing and the pre-settlement forecasting of cash and securities and describes the different types of settlement including “Delivery versus Payment.” Dickinson gives a clear explanation for the reasons trades fail to settle and what actions can be taken to manage failures. In this practical resource, Dickinson includes an analysis of the complexities, processing requirements, and information flow of the most risky area within operations – Corporate Actions. Financial Markets Operations Management also describes the different forms of securities financing and explains the associated risks and the ways these risks are mitigated. The author explains how the securities transactions impact the profit & loss statement and balance sheet. The concluding chapter, reviews the importance of efficient and timely asset reconciliation and reveals how it can be used as a predictive tool to prevent problems from occurring. This essential text covers the most crucial information for operational staff working in financial services and contains a wealth of formulas, questions and problems within each chapter, along with helpful spreadsheet applications and exhibits.