ROC-A Exam key terms

A multilateral trading venue authorised and supervised by a public authority, operating standardised rules on admission, transparency and reporting. Trades executed there benefit from prescribed conduct and disclosure obligations.

A trading venue that brings together multiple third-party buying and selling interests on a non-discretionary basis under transparent rules. It is typically subject to lighter admission requirements than a regulated market.

A venue for non-equity instruments where the operator exercises discretion over how orders interact, including matching on a discretionary basis. Client orders may be matched against proprietary interests under specific safeguards.

A firm that, on an organised and frequent basis, deals on its own account when executing client orders outside a trading venue. It must meet transparency and quote obligations for the instruments it covers.

The European framework governing investment services, trading venues, transparency and investor protection. It sets authorisation conditions, conduct rules, transaction reporting duties and product governance requirements for investment firms.

The rulebook setting when a public offer or admission to trading of securities requires a prospectus, its content and approval process. It also provides exemptions and the universal registration document regime.

The set of prohibitions and surveillance duties covering insider dealing, unlawful disclosure of inside information and market manipulation. Firms must detect, report and prevent abusive behaviour and keep insider lists.

Precise, non-public information relating directly or indirectly to issuers or instruments that, if made public, would likely significantly affect prices. Trading or tipping on it is prohibited.

A notification a firm sends to the competent authority when it has reasonable grounds to suspect market abuse in an order or transaction. It must be filed promptly without alerting the client.

An organisational and informational barrier separating business units that hold confidential or inside information from those that trade or advise clients. Breaches can create conflicts and market abuse exposure.

Situations where a firm's own interests, or those of one client, may harm another client's interests. Firms must identify, prevent or manage such conflicts and disclose them where management is insufficient.

Fees, commissions or non-monetary benefits paid to or by a third party in connection with a service to a client. They are permitted only if they enhance service quality and are clearly disclosed.

The duty to take all sufficient steps to obtain the best possible result for clients when executing orders, considering price, cost, speed, likelihood of execution and settlement, size and any other relevant factor.

A document describing the venues and counterparties a firm uses and how it achieves best execution for each client category. Clients must be informed of material changes to it.

The operational and conduct rules for receiving, recording, transmitting and executing client orders promptly, fairly and in the sequence received, unless characteristics or prevailing conditions justify otherwise.

The principle that a firm must not use client orders for its own account or a colleague's benefit before the client order is executed, and must not front-run known client flow.

Trading ahead of a known pending client order to profit from the expected price impact. It is a form of market abuse and a breach of order handling duties.

The assessment that a recommended product or service is appropriate for a client's knowledge, experience, financial situation, objectives and risk tolerance. It applies to advice and discretionary management.

The test applied to non-advised services, checking whether a client has the knowledge and experience to understand the risks of a product. It is less extensive than the suitability assessment.

The classification of clients as retail, professional or eligible counterparty, which determines the level of protection, disclosure and reporting owed. Clients may be reclassified only under defined conditions.

The requirement for manufacturers and distributors to define a target market, test products for suitability, and review them periodically. It aims to prevent mis-selling and ensure distribution matches client needs.

The process of identifying clients, verifying their identity, understanding their business and monitoring activity. It underpins anti-money-laundering controls and market conduct obligations.

A unit of ownership in a company that carries residual claims on profits and assets, usually with voting rights. Holders rank behind creditors and preferred shareholders on liquidation.

A class of equity with a fixed or priority dividend and priority over ordinary shares on liquidation, often without voting rights. It may be cumulative or redeemable depending on its terms.

A distribution of profits to shareholders, declared by the board and usually paid in cash or shares. Its timing and amount depend on earnings, policy and applicable company law.

The date from which a buyer of shares is no longer entitled to the next declared dividend. Trades before it carry the dividend; trades on or after it do not.

The standard period between trade execution and final transfer of cash and securities, commonly two business days for European equities. It affects funding, dividend entitlement and counterparty risk.

An entity that holds and transfers securities in book-entry form and settles transactions on behalf of participants. It is a key infrastructure provider in the post-trade chain.

A firm that safekeeps client securities, administers corporate actions and settles trades on the client's behalf. It holds assets in segregated accounts and may also provide reporting and cash management.

The requirement to hold client money and securities separately from the firm's own assets and from other clients' assets. It protects clients if the firm becomes insolvent.

A debt instrument under which the issuer pays interest and repays principal on agreed dates. Holders rank ahead of shareholders and bear credit and interest rate risk.

The single discount rate that equates a bond's future cash flows to its current market price, assuming it is held to redemption. It reflects coupon, price, maturity and reinvestment assumptions.

A measure of a bond's price sensitivity to changes in interest rates, expressed in years for Macaulay duration or as a percentage price change for modified duration. Higher duration means greater rate risk.

The difference in yield between a bond and a comparable risk-free benchmark, reflecting the issuer's default risk and liquidity. It widens when credit conditions deteriorate.

A short-term, highly liquid debt security with an original maturity of one year or less, such as treasury bills or commercial paper. It is used for cash management and funding.

An unsecured short-term promissory note issued by companies to raise working capital, usually with maturities of days to months. It is typically rolled over and depends on issuer credit quality.

A sale of securities with a commitment to buy them back at a set price and date, economically a secured loan. It is central to money market funding and collateral management.

A financial contract whose value derives from an underlying asset, rate, index or event. Common forms include futures, options and swaps, used for hedging or speculation.

A contract giving the buyer the right, but not the obligation, to buy or sell an underlying at a set price before or on expiry. The seller receives a premium and bears contingent obligations.

An agreement to exchange cash flows between parties over a defined period, based on interest rates, currencies or other reference values. Swaps are typically traded over the counter.

A packaged investment combining a derivative with a deposit or debt instrument to produce a tailored payoff, such as capital protection or enhanced yield. Payoffs may cap gains or expose principal.

The risk that the other party to a transaction fails to meet its obligations before final settlement. It is most acute in over-the-counter derivatives and secured funding.

The market in which securities are first issued and sold to investors, raising capital for the issuer. Subsequent trading occurs in the secondary market.

The market where already-issued securities are bought and sold between investors, providing liquidity and price discovery. The issuer generally receives no proceeds from these trades.

Automated technology that splits and directs orders across venues and counterparties according to pre-set criteria. It supports best execution but must be monitored and periodically reviewed.

The obligation to report complete and accurate details of executed transactions to the competent authority promptly, typically by the end of the next working day. It supports market abuse detection.

The requirements a company must satisfy to have its securities admitted to trading on a regulated market, covering eligibility, disclosure and ongoing obligations. Breaches may lead to suspension or delisting.