ROC-A Exam cheat sheet

ROC-A scope covers the conduct of business in equity, fixed income, money market, and derivative products traded on regulated and multilateral venues.

Regulated market (RM), multilateral trading facility (MTF), and organised trading facility (OTF) differ by execution model: RM operates a formal listing and admission regime, MTF executes non-discretionary rules without listing, OTF permits discretionary execution and matched principal trading.

Systematic internaliser (SI) status obliges a firm to publish firm quotes in liquid instruments up to standard market size and to execute client orders at those quotes, subject to size and client-type limits.

Transparency regime: pre-trade transparency applies to quotes and order book data; post-trade transparency requires publication of price, volume, and time of execution, with deferred publication available for large or illiquid trades.

Best execution, order handling, client categorisation (retail, professional, eligible counterparty), and conflicts of interest sit within the conduct-of-business rulebook, not prudential capital rules.

Market abuse framework prohibits insider dealing, unlawful disclosure of inside information, and market manipulation, and requires suspicious transaction and order reports (STORs) to the regulator without delay.

Consolidated tape and transaction reporting obligations require identification of the executing entity, the client, and the instrument under a standard reference data scheme.

Regulatory status of a venue determines the applicable transparency, reporting, and best execution obligations; a trade on an OTF is not treated identically to a trade on an RM.

Order types: market order (immediate execution at best available price), limit order (execution at or better than the stated price), stop order (becomes a market order once the trigger trades).

Time-in-force: day, good-till-cancelled, immediate-or-cancel, and fill-or-kill; IOC and FOK remove residual quantity from the book after the execution attempt.

Corporate actions adjust the order book and open orders: dividends, splits, rights issues, and mergers each require a defined ex-date adjustment to price and quantity.

Trading halts and circuit breakers suspend continuous trading and may move the instrument to an auction; volatility auctions extend the price band before re-opening.

Short selling rules require locate or borrow confirmation before execution and disclosure of net short positions above the applicable threshold.

Settlement cycle for equities is T+2 in most major markets; failed settlement triggers buy-in procedures and potential compensation claims.

Tick size regimes set minimum price increments per instrument and venue; sub-tick trading is prohibited to protect market integrity and order priority.

Auction mechanics: opening, intraday volatility, and closing auctions use uncrossing algorithms that maximise executable volume at a single clearing price.

Bond price-yield relationship: price rises when yield falls; the relationship is convex, so price gains exceed price losses for equal yield moves.

Macaulay duration is the weighted average time to cash flows; modified duration approximates percentage price change for a 1 basis point or 1 percent yield move.

Money market conventions: discount instruments (T-bills, commercial paper) quote on a discount basis, while coupon instruments accrue on an actual/actual or actual/360 basis.

Clean price excludes accrued interest; dirty price equals clean price plus accrued interest from the last coupon date to settlement.

Yield measures differ by instrument: yield to maturity assumes reinvestment at the same rate; yield to call and yield to worst reflect embedded call features.

Credit spread equals the instrument yield minus the benchmark government yield of matching maturity; spread duration measures sensitivity to spread changes.

Repo and reverse repo are collateralised borrowing and lending; haircuts and margin calls manage counterparty credit and collateral price risk.

Floating rate notes reset off a reference rate plus a quoted margin; the spread reflects credit and liquidity, and the price stays near par at each reset.

Futures are exchange-traded, standardised, and margined daily; forwards are OTC, bespoke, and carry counterparty credit risk.

Option payoff: call payoff at expiry equals max(spot minus strike, 0); put payoff equals max(strike minus spot, 0); premium is paid upfront by the buyer.

Put-call parity for European options: call minus put equals spot minus the present value of the strike, adjusted for dividends.

Greeks: delta measures spot sensitivity, gamma measures delta change, vega measures volatility sensitivity, theta measures time decay, rho measures rate sensitivity.

Interest rate swaps exchange fixed for floating payments on a notional; the swap rate at inception is the rate that makes the floating leg value equal the fixed leg value.

Structured products combine a bond or deposit with a derivative overlay; capital protection level, participation rate, cap, and barrier are the key payoff terms.

Knock-in and knock-out barriers activate or extinguish the option; barrier proximity increases delta sensitivity and can create discontinuous payoffs.

Central clearing of eligible derivatives reduces counterparty risk through daily variation margin and initial margin posted to a CCP.

Best execution requires all sufficient consideration of price, cost, speed, likelihood of execution and settlement, size, and nature of the order; price alone is not the sole criterion.

Execution policy must be documented, reviewed periodically, and disclosed to clients; client consent to the policy does not discharge the firm from taking all sufficient steps.

Order aggregation is permitted where it is unlikely to work to the disadvantage of any client; allocation must be fair and recorded before the order is placed.

Client order priority: a firm's own orders must not be executed ahead of comparable client orders, and personal account dealing must not disadvantage clients.

Client money must be segregated from firm money; reconciliation is performed frequently, and any shortfall is reported and remedied promptly.

Record keeping: order and transaction records, communications, and execution decisions must be retained for the applicable regulatory period.

Specific client instruction may override best execution for the element instructed, but the firm remains responsible for elements not covered by the instruction.

Suitability and appropriateness assessments apply when advising or selling complex products; the assessment must be recorded and the client informed of the basis.

Inside information is information of a precise nature, not generally available, relating to an issuer or instrument, which if made public would likely significantly affect price.

Insider dealing prohibitions extend to derivatives and to related instruments; dealing, recommending, and unlawful disclosure are each separate breaches.

Market manipulation includes false or misleading transactions, price positioning, and abusive algorithms; intent and effect are both relevant to the assessment.

Personal account dealing requires pre-clearance, restricted-list screening, and minimum holding periods; front-running client orders is prohibited.

Inducements must not impair the firm's duty to act honestly, fairly, and professionally; research and non-monetary benefits are subject to specific rules.

Conflicts of interest must be identified, prevented or managed, and disclosed where management is insufficient; a conflicts register and information barriers are standard controls.

Gifts and entertainment are recorded and capped under firm policy; exceeding the threshold requires approval and may create an inducement.

Whistleblowing arrangements must protect confidentiality of the reporting person and prohibit retaliation; escalation routes are documented.