Martin: Created page with "=Introduction= ===Wholesale/Professional Market=== {| class=wikitable |Equities||Insurance |- |Bonds||Investment banking |- |Foreign exchange||Custodian banking |- |Fund Manag..."

2021-09-14T21:39:10Z

Created page with "=Introduction= ===Wholesale/Professional Market=== {| class=wikitable |Equities||Insurance |- |Bonds||Investment banking |- |Foreign exchange||Custodian banking |- |Fund Manag..."

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=Introduction=
===Wholesale/Professional Market===
{| class=wikitable
|Equities||Insurance
|-
|Bonds||Investment banking
|-
|Foreign exchange||Custodian banking
|-
|Fund Management||International banking
|-
|Derivatives, options/swaps/futures
|}

===Retail===
{| class=wikitable
|Retail banking||Investment services - execution only/wealth mgt
|-
|Insurance||Financial Planning
|-
|Pensions
|}

==== Multi-lateral trading facilities ====
* Rivals to traditional stock exchange
* AKSA crossing networks/matching engines

===Bond markets===
Larger size/volume than equity - smaller volume of trades

$84 Trillion - 70% domestic, 30% International

===Equity market (stocks and shares)===
{| class=wikitable
|NYSE/NYSE Euronext|| $13.6 Trillion US + $2.7 Trillion Europe
|-
|NASDAQ||$4.5 Trillion
|-
|London||$2.5 Trillion
|}

===Foreign Exchange (Forex)===
Largest market daily turnover - $4 Trillion Daily

Over the counter OTC

Distributed trading - no central clearing

Prices - Exchange strength - supply/demand - more demand rise in value

Market for companies to deal in the in/outflow

UK main centre - geographic advantage 38%, US 18%

===Derivatives===
Complex - instrument for currencies/interest rates/equities/credit risks

Exchange traded and OTC - Europe largest

Chicago Mercantile exchange CME - largest exchange

OTC ~ 4x size of exchange

Interest rate derivative contracts - interest rate swaps - Euro/US dollar mainly

===Insurance markets===
Manage risk

Names - liable to full extent of wealth

Corporate entities - limited liability

Names - join forming syndicate - syndicate "writes insurance"

premiums - payout = profit -> names

Lloyds - complex risk - casualty, property, energy, motor, aviation, marine, re-insurance
* innovative - unusual specialist complex risks

==Industrial Participants ==
===Retail Banks===
{|class="wikitable"
| take deposits ||rowspan="2"| retail customers + business
|-
| lend
|-
| payment/money transfers||
|}
Consolidation + integration - investments + pensions + insurance

===Savings institutions===
====Building society====
UK only 19 Century

Demutulisation 1980 -> companies

Deposit + mortgages

Owned by people borrowing/saving with them - members

===Investment Banks===
* Corporate finance/advisory - primary market/take overs/ mergers & acquisitions
* Banker for - governments, institutions, corporates
* Treasury dealing - foreign currency - protection against interest rates/exchange rate - financial engineering
* Investment management - pension funds/charity/collective investment schemes
* Securities trading - equities/bonds/futures
Tend to specialise in one area

===International banks===
Cross border transactions
* Trade
** exporter wants payment before shipping
** Importer wants proof of shipment before paying
* SWIFT Society of World wide Interbank Financial Telecommunications - electronic payment system
** Payment of goods, flow of trade

===Insurance Companies===
* Risk management
* Protection planning - financial advice
* Premium paid in exchange for cover
** Money invested in shares/bonds - (release investment) used to pay claims
* Market investment products - structured products
** guaranteed stock market bonds

===Pension Funds===
Large long term investments in shares/bonds/cash - properties

===Fund managers===
AKA Investment/Asset management

Management of investment portfolios - for institutions/private $118 trillion
* Conventional Funds - pensions/mutual funds & Insurance
* Alternative Funds - Hedge funds/private equity/exchange traded/sovereign wealth funds
* Private wealth funds
* London leading centre
Run portfolio of investments for others

Customers - Pension funds/Insurance companies/unit trusts/OEICs Open Ended Investment Companies/Wealthy individuals

* Investment managers
** Institutional fund managers - unit trusts/companies/insurance
** Private client fund managers - wealthy individuals
Charge small % of value of fund for managing it

*Investment schemes
**can include hedge funds
**for companies/charities/local governments/institutes

===Stockbrokers===
* Arrange trades on behalf of clients
* May advise (charge fees) or be execution only (commission on transactions)
* May look after assets - charge custodial/management fees

===Custodian banks===
look after portfolios of shares/bonds
* Hold assets for safe keeping
* Arrange settlement - purchase/sales of securities
* Collect income - dividends (equities)/interest (bonds)
* Info on companies - AGM
* Manage cash transactions
* Perform foreign exchange
* Provide regular report on actions
Mostly divisions of investment banks - dominated by small number - '''global custodians'''

===Trade and professional bodies===
Facilitates cross firm development

Enables efficient market

{|class="wikitable"
|International Capital Markets Association ICMA || Bonds
|-
|Futures and Options Association||rowspan="2"|Derivatives
|-
|International Swaps and Derivatives Association ISDA
|-
|Investment Management Association IMA||Fund managers
|-
|Association of British Insurers ABI||Insurance Companies
|-
|Association of Private Client Investment Managers and StockBrokers APCIMS||Investment Managers
|-
|British Bankers Association BBA||Banks
|-
|Tax Incentivised Savings Associations TISA||Investment Funds
|}

===Third Party Administrators===
* Investment admin on behalf of others
* Specialise in investments
* Outsourcing enabling focus on core business

==Investment Distribution Channels==
===Financial Advisor===
* Survey clients (''Fact find'') - financial position, preferences & objectives
* Advise on actions & products
; Independent
: Comprehensive fair analysis - unbiased, unrestricted
; Restricted
: Only one firms products - Employer
===Platforms===
Online service - intermediaries use to view/admin clients investment portfolio

Tools to view/analyse + choose products + normally arrange custody

;Platform
:Fund supermarket - ''one stop shop'' range of Unit trusts/OEIC - all vendors
:Wraps- more comprehensive - ''more comprehensive'' Unit trusts/OEIC/ISA/Pensions/Insurance bonds - more products - holistic view of all assets - automate back office

Available directly to investors and financial advisors

Main advantage - distribute fund manager groups products to financial advisors

Charge for service/commission from provider

===Execution only===
Customer responsible - no advise
; Must record:
: No advise given
: Made clear not responsible for product suitability

IOC: Financial Services Industry - Revision history

Martin: Created page with "=Introduction= ===Wholesale/Professional Market=== {| class=wikitable |Equities||Insurance |- |Bonds||Investment banking |- |Foreign exchange||Custodian banking |- |Fund Manag..."