ROC-A Exam flashcards

33 cards. Read the term and the definition here. The deck at the top of this page is optional.

Systematic internaliser

A firm that, on an organised and frequent basis, executes client orders off-venue against its own book in a systematic way, and must publish firm quotes in liquid instruments up to standard market size.

Multilateral trading facility

A trading venue that brings together multiple third-party buying and selling interests on non-discretionary rules, without operating a formal listing or admission regime for the instruments traded.

Suspicious transaction report

A notification made to the market regulator without delay when a person professionally arranging transactions has reasonable grounds to suspect insider dealing, market manipulation, or attempted market abuse.

Pre-trade transparency

The obligation to publish current bid and offer prices, depth of trading interest, and order book data to the market before execution, subject to waivers for large or illiquid orders.

Eligible counterparty

A client category for firms such as investment firms and credit institutions that receives reduced conduct protections, including no best execution duty unless separately agreed.

Limit order

An order to buy or sell at no worse than a stated price; it may rest on the order book until executed, cancelled, or expired, and guarantees price but not execution.

Fill-or-kill order

An order that must be executed in full immediately or cancelled entirely, with no partial execution and no residual quantity resting on the order book.

Volatility auction

A call auction triggered when an instrument's potential price moves outside a defined band, extending the price range before continuous trading resumes to allow order flow to rebalance.

Tick size

The minimum permitted price increment for an instrument on a given venue; orders priced off the tick grid are rejected and tick size affects queue priority and spread.

Short selling locate

A requirement to have borrowed or confirmed a reasonable expectation of borrowing the securities before executing a short sale, evidenced and documented in advance.

Closing auction

An end-of-day uncrossing that aggregates orders and executes at a single clearing price maximising executable volume, used to establish the official closing price.

Modified duration

Macaulay duration divided by one plus yield per period; it approximates the percentage change in bond price for a small change in yield, ignoring convexity.

Accrued interest

Interest accumulated on a coupon bond from the last coupon date to settlement date; the buyer pays clean price plus accrued interest, giving the dirty price.

Credit spread

The difference between a bond's yield and the yield of a comparable-maturity government benchmark, compensating investors for default, recovery, and liquidity risk.

Repo transaction

A sale of securities with an agreement to repurchase at a later date at a set price; economically collateralised lending, with haircuts protecting the cash lender.

Yield to worst

The lowest yield an investor can receive on a callable bond, calculated across all possible call dates and the maturity date, assuming no default.

Discount basis quote

A money market convention where the quoted rate is applied to face value over the instrument's term and deducted from face to give the purchase price, as with T-bills.

Put-call parity

For European options on the same underlying and strike, call price minus put price equals spot price minus the present value of the strike, adjusted for dividends.

Delta

The rate of change of an option's price with respect to the underlying price; call delta is positive and put delta is negative, ranging from zero to one in magnitude.

Knock-out barrier

An option feature that extinguishes the option if the underlying touches a specified barrier level before expiry, reducing premium but creating discontinuous payoff risk.

Interest rate swap

An agreement to exchange fixed and floating interest payments on a notional principal over a set term; the fixed rate is set so both legs have equal initial value.

Variation margin

A daily payment reflecting the change in value of a cleared derivative position, collected by the central counterparty to limit accumulated counterparty credit exposure.

Participation rate

In a structured note, the percentage of the underlying index or asset return passed through to the investor, often combined with a cap and a capital protection level.

Best execution

A duty to take all sufficient steps to obtain the best possible result for clients, considering price, cost, speed, likelihood of execution and settlement, size, and order nature.

Order aggregation

Combining client orders into a single order; permitted only where unlikely to disadvantage any client, with a documented allocation method set before the order is placed.

Client money segregation

Holding client funds in separate designated accounts, distinct from firm assets, with frequent reconciliations and prompt remediation of any shortfall identified.

Specific client instruction

A client direction on how to execute an element of an order; it satisfies best execution for that element only, leaving other elements still subject to the duty.

Suitability assessment

A recorded evaluation of a client's knowledge, experience, financial situation, and objectives before recommending or selling a product, ensuring the product is appropriate for that client.

Inside information

Precise, non-public information relating to an issuer or instrument that, if disclosed, would likely significantly affect its price; dealing or tipping on it is prohibited.

Front running

Trading on a firm's own account ahead of a known pending client order to profit from the expected price impact, a form of market abuse and a breach of client duty.

Inducement

A fee, commission, or non-monetary benefit paid to or by a third party that may impair the firm's duty to act in the client's best interest, subject to disclosure and quality rules.

Information barrier

A control separating teams with access to inside information from other staff, restricting physical access, systems, and communications to prevent unlawful information flow.

Personal account dealing

Trading by staff for their own account, requiring pre-clearance, restricted-list checks, and minimum holding periods to prevent conflicts and abuse of client or inside information.