CISI Global Securities Operations flashcards

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

Primary vs secondary market

In the primary market an issuer raises new capital and receives the proceeds; in the secondary market investors trade existing securities with each other and the issuer receives nothing.

ISIN

A 12-character international securities identification number that uniquely identifies a security issue; it is the standard identifier used in trade confirmations, settlement instructions and asset servicing records.

Legal Entity Identifier

A 20-character alphanumeric code identifying a legally distinct entity that participates in financial transactions; used in trade reporting, KYC and settlement data to ensure unambiguous counterparty identification.

Central counterparty novation

The process by which a CCP interposes itself between buyer and seller, becoming buyer to every seller and seller to every buyer, thereby reducing counterparty credit risk through multilateral netting and margining.

Delivery versus payment

A settlement mechanism linking securities delivery and cash payment so that one does not occur without the other; DVP models 1, 2 and 3 differ in whether settlement is gross or net and simultaneous or sequential.

Settlement cycle T+2

A convention under which a trade executed on trade date T settles two business days later, excluding weekends and market holidays; many markets remain on T+2 while others have moved to T+1.

Settlement fail

A situation where securities or cash are not delivered on the contractual settlement date; it can trigger buy-ins, cash penalties and regulatory reporting obligations under settlement discipline regimes.

Same-day affirmation

A post-trade process in which the buy-side institution agrees trade details with its executing broker by the end of trade date, reducing mismatches and settlement fails before the settlement cycle begins.

Standing settlement instructions

Pre-agreed custodian, account and payment details held for a counterparty and market, used to enrich trades automatically so that settlement instructions do not need to be re-entered manually.

Trade confirmation

A record, electronic or paper, in which counterparties agree the economic terms of a trade, including instrument, quantity, price, settlement date, fees and settlement instructions, before clearing and settlement.

Allocation of block trade

The process of splitting an executed block trade across underlying funds or accounts, after which each allocation is affirmed and sent to the relevant custodian for settlement.

Ex-date and record date

The ex-date is when a security trades without the entitlement; the record date is the date on which holdings determine entitlement. Settlement timing determines which date applies to a trade.

Mandatory corporate action

An event that applies automatically to all holders without an instruction, such as a cash dividend, stock split or merger; the custodian processes it and credits the resulting cash or securities.

Voluntary corporate action

An event such as a tender offer, rights subscription or proxy vote that requires the holder to instruct; missing the instruction deadline can forfeit the entitlement or the right to vote.

Segregation of client assets

The requirement to hold client securities and cash separately from the custodian's own assets and from other clients' assets, supporting tracing and return in an insolvency.

Sub-custodian

A local agent appointed by a global custodian to hold assets and provide settlement in a particular market, complying with local regulation and market practice on the custodian's behalf.

Withholding tax on dividends

Tax deducted at source from dividend income by the issuer's jurisdiction; the net amount is credited to the client, and reclaims depend on treaty relief and local documentation.

CLS payment-versus-payment

A settlement service that simultaneously settles both legs of an FX transaction, eliminating principal risk that one counterparty pays and the other fails to deliver.

ISO 20022

A global messaging standard for financial data, including payment messages such as pacs.008 and camt.053; it is replacing legacy SWIFT MT formats across major payment and securities systems.

Value date

The date on which funds or securities become available and usable; cash forecasting and liquidity management must be based on value dates rather than booking dates.

FX swap

A transaction combining a spot exchange of two currencies with a forward exchange in the opposite direction at an agreed future date, used to manage short-term funding and currency exposure.

Three lines of defence

A governance model in which business operations own and manage risk, risk and compliance provide independent oversight, and internal audit provides independent assurance to the board.

Reconciliation break

A difference between two records, such as holdings versus custodian or ledger versus bank statement, that must be investigated, classified by cause, resolved within SLA and escalated if aged.

Key risk indicator

A metric, such as failed trade rate or aged break count, that provides early warning of increasing operational risk and is monitored against agreed thresholds.

Recovery time objective

The maximum acceptable time to restore a business service after disruption; it is set for important business services and tested through business continuity and resilience exercises.

MiFID II transaction reporting

The obligation for investment firms to report complete and accurate details of executed transactions to a competent authority by the end of the next working day, using specified identifiers.

CSDR settlement discipline

An EU regime imposing cash penalties on failed settlements, mandatory buy-in processes and reporting obligations, designed to improve settlement efficiency and reduce fails.

EMIR trade reporting

The requirement to report details of derivative contracts to a registered trade repository, covering counterparties, clearing status, valuation and collateral, within specified deadlines.

Beneficial ownership identification

The process of identifying the natural persons who ultimately own or control a customer, commonly using a 25% ownership or control threshold, as part of customer due diligence.

Enhanced due diligence

Additional checks applied to higher-risk customers, politically exposed persons and higher-risk jurisdictions, including source of funds and wealth verification and more frequent review.

Sanctions screening false positive

A match against a sanctions list that, after investigation, is shown not to relate to the sanctioned party; the investigation and disposition must be documented for audit.

Security master data

The reference data record for each instrument, including ISIN, currency, market, settlement convention and corporate action terms, which drives trade processing, settlement and reporting downstream.