The Markets
Through a combination of videos, course notes and a quiz, you will be guided through everything you are expected to know under the "Markets" section of the FIA Syllabus v4.0.
THE MODULE CONSISTS OF:
- Videos: 2 hours 19 minutes
- Course notes: 40 pages of downloadable course notes. The notes are clearly marked and follow each of the topics listed on the FIA syllabus. The notes should be worked through in conjunction with the videos to ensure you are fully prepared to take the exam. We recommend you print these off and make notes as you watch the videos.
- Quiz to test your knowledge: Complete the quiz after you have finished studying the videos and course notes. It is recommended that you do the quiz without referring to the notes so that you gain a better understanding of the areas you may need to focus on. You will be provided with your score at the end.
HOW LONG DO I HAVE ACCESS FOR?
You have access to the course for 365 days from the date of purchase.
HAPPY LEARNING!
TO BOOK YOUR EXAM PLEASE DO SO VIA THE FISD WEBSITE
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FISD FIA SYLLABUS v4.0
THE MARKETS - MODULE 1
A candidate must be able to demonstrate a broad understanding of the markets that generate and make use of the complex array of information and content characterized as market and reference data. They must understand that different types of organization have different requirements for data; they must understand what these differences are and why such requirements exist.
Where, how and why is capital created, and for what purpose? What is meant by financial intermediation and who are the participants in the investment process? What is the role of exchanges and related trade-crossing services, government and regulatory agencies, and what part does market and reference data play in the financial markets?
1.1 THE ROLE OF THE FINANCIAL MARKETS
A candidate should be able to understand: the role of the financial markets and their structure; the capital formulation process; and the broad structures and makeup of the global financial markets.
1.1.1 The trade lifecycle
A candidate should understand the overall concept of the trade lifecycle:
• Pre-trade price investigation
• Pre-trade risk management and compliance assessment
• Trading venue selection – the trade
• Post-trade confirmation
• Trade reporting
• Post-trade clearing and settlement
...and the typical groups involved.
1.1.2 Broad concepts
A candidate should understand broad concepts:
• The capital markets
• Primary and secondary markets
• Bull and bear markets
• Long and short
• Front running
1.2 MAJOR ASSET CLASSES
A candidate should understand the primary asset classes and the basic characteristics of each.
• Equities and the Key Types
• Types of common stock and preferred stock
• Including equity-like instruments such as ETFs (exchange traded funds) and CFDs (contracts for difference)
• Fixed Income Instruments and the Key Types
• Including concepts such as – coupon, maturity, face value, ratings, yield, etc.
• Types such as – bills, notes, bonds, government, treasury, municipal, corporate, supra national, zero coupon
• Money Markets
• Including – certificates of deposit (CDs), bankers acceptances, commercial paper, repurchase agreements (repos), etc.
• Rates
• Including – interest rate swaps (IRS), interest rate options (IRO), basis swaps, forward rate agreements (FRAs).
• FX
• Spot, forward, non-deliverable forwards, currency pairs, swaps, pips, cross currencies, etc.
• Cryto currencies – represent a new asset class
• As a minimum understanding what Bitcoin is and how it works
• Commodities and Energy
• Agricultural softs (eg coffee and sugar), precious metals (eg gold and platinum), oil, electricity/power, etc.
• Futures and Options
• Financial, currency and commodity
• Credit Derivatives
• Credit default swaps, collateralized debt obligations
• Structured Products
What are the broad data requirements/interests of such groups? Data is included more in section 2 of this Syllabus 'The Data'
1.3 PARTICIPANTS IN THE FINANCIAL MARKETS
They should understand what the major types of institutions are, their broad characteristics and what role they play.
1.3.1 The sell side
A candidate should understand what types of organizations fall under the broad category of being a “sell side” institution.
• Investment banks and their role in the primary issuance of equities and bonds;
• Investment banks and their role in advising clients on mergers and acquisitions;
• Investment banks and their role in providing corporate and/or project finance;
• Investment banks and brokerage houses' role in:
• Acting as “agency brokers” on behalf of their clients
• Provision of advice through equity analysts;
• Full service, low touch and no touch (e.g. DMA) services;
• Execution services including Algo Trading;
• “Prime brokerage” services.
• Acting as “principal” in transactions, i.e. “proprietary traders”
• Commercial and retail banks providing bank services to corporations and individuals;
• What is an intermediary? What is the role of an intermediary in guaranteeing settlement of transactions?
• Retail brokerage – providing brokerage service to individuals and households as contrasted against “institutional brokers” who primarily do business with the “institutional” buy side. Online brokerage is a further subset that should be well understood.
• Wealth management – how is this different from asset/fund management.
• Systemic Internalisers (see MIFID) – what are they and what role do they perform
1.3.2 The buy side
A candidate should understand what types of organizations fall under the broad category of being a “Buy Side” institution.
• Traditional “long only” asset management firms
• Describe the role of fund managers;
• What are mutual funds, unit trusts, investment trusts?
• Difference between 'active' and 'passive' investing
• The role of client mandates
• Other buy side participants
• Describe the role of banks, insurance companies, pension plan sponsors
• What is an asset owner?
• Sovereign wealth fund
• Hedge funds
• What is a hedge fund?
• How do hedge funds differ from traditional asset management firms?
• What is a family office?
• ETF sponsors
• What is an ETF sponsor?
1.3.3 Exchanges and other trading venues
The different types of exchanges and the regulatory framework they operate within.
• Cash equities and exchange traded bonds (stock exchanges)
• What do they do? Listing, trading, settlement, data, etc.
• Who are the main organizations globally?
• In what ways are they automated and why does that matter?
• What is “floor trading”?
• In Europe what are:
• RM (Regulated Markets)
• MTFs (Multilateral Trading Facilities)
• OTFs (Organised Trading Facilities)
Futures and options (derivative) exchanges
• What do they do?
• What are the main organizations?
• How are they automated?
• Where does floor trading still exist – and how does it work?
• Alternative trading systems (ATS) and multilateral trading facilities (MTF), ECN electronic communications networks, crossing networks and dark pools
• What are these?
• Where do they exist and why?
• How did they evolve?
• What regulatory framework do they operate under?
• What is electronic trading?
• Differences between “dark” and “lit” markets
• Fixed income, FX and other non-exchange (i.e. over the counter – OTC) traded instruments
• Understanding the concept of OTC markets
• The role of the inter dealer broker (IDB)
• The issue of counterparty credit management
• Role of FX dealing systems
• New, regulator-mandated trading venues such as swaps execution facilities (SEFs)
1.3.4 Miscellaneous organisation types
Other organization types, including:
• Numbering agencies, custodians, transfer agents and clearing agents
1.4 ROLE OF GOVERNMENT, CENTRAL BANKS AND REGULATORY AUTHORITIES
The role and function of government, central banks and regulatory authorities that govern the financial markets:
• What the key regulatory bodies are;
• How regulatory bodies impact market/reference data and securities at a conceptual level - such as listings, ownership restrictions and trading rules;
• What the key laws and regulations are that impact the creation, distribution and usage of financial information
1.5 PRIMARY BUSINESS FUNCTIONS AND RESPONSIBILITIES
The role and function of the primary business functions of the various departments in a financial institution, and the type of market and reference data that department would generate or consume:
• Trading (Dealing) floor
• Securities research
• Portfolio management
• Risk management
• Settlement and clearing
• Pricing and accounting
• Securities lending
• Client reporting
• Corporate actions
• Performance and attribution
• Automated execution services (Algo Trading)
In addition a candidate should understand the following phrases:
• Front office
• Back office
• Middle office
A candidate should be able to recognize broad job functions/titles:
• Trader
• Sales-person
• Sales trader
• Analyst
• Portfolio manager
• “Quant” - Quantitative analyst and/or trader
• Retail broker
• Wealth manager
• Financial advisor
• Risk manager
• Compliance officer
