Chapter 6 - IT CISI

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1. What is the motivation of the LENDER of stock?

  • To borrow cash at a better rate of interest than it would if it borrowed on an unsecured basis
  • To increase their return by loaning out stock for a fee.
  • to lend cash on a secured basis
  • to acquire a specific quantity of a given stock to meet their commitment to deliver
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2. What is an FoP (Free of Payment) instruction?

  • Payment and delivery are NOT inextricably linked as with DvP
  • Payment and Delivery ARE inextricably linked unlike DvP
  • An instruction to delivery once the payment is made

3. In a stock loan transaction, what is to be paid by the lender and borrower?

  • lender pays interest on the collateral vs borrower pays a fee for using the stock
  • Borrower pays interest on the collateral vs lender pays a fee for using the stock

4. What does the status code "USEC" mean?

  • Trade is unmatched, but you have no stock to deliver - try to borrow.
  • A trade party has alleged a trade against you - investigate
  • Urgent Unmatch - the trade is due for settlement tomorrow or earlier
  • Unmatched - you have sent an instruction but your counterparty hasn't.

5. Securities firms that act as specialized intermediaries in the stock lending area to create liquidity in the market are known as what?

  • Stock Lending Intermediaries (SLIs)
  • Repos
  • Stock lending Firms
  • Custodians

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