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CISI Global Securities Operations study materials
CISI Global Securities Operations study resources

CISI Global Securities Operations: The Financial Services Industry and the Securities Market Environment

CISI Global Securities Operations · Work through your exam, one topic at a time.

All guide sections

The Financial Services Industry and the Securities Market Environment

What this domain tests

This domain checks that you can place every institution in the trade lifecycle and distinguish primary from secondary markets, exchange-traded from OTC activity, and the separate roles of trading, clearing and settlement infrastructure.

Market participants

  • Issuers raise capital via IPOs, placings, rights issues and bond issuance. The primary market is where new securities are sold and the proceeds go to the issuer.
  • Buy-side firms (pension funds, asset managers, insurers, hedge funds) own securities; the sell-side (brokers, dealers, market makers) intermediates and provides liquidity.
  • Custodians and sub-custodians safekeep assets, collect income and process corporate actions, but never execute or clear the trade.
  • CSDs hold securities in book-entry form; CCPs novate trades and manage counterparty risk; trading venues match orders.
  • Regulators (FCA, SEC, ESMA) and standard setters (IOSCO, CPMI) set conduct, prudential and infrastructure standards.

Instruments and venues

Equities, government and corporate bonds, money market instruments (commercial paper, CDs, T-bills - original maturity of one year or less), and derivatives. MiFID II classifies venues as regulated markets, MTFs and OTFs; systematic internalisers deal on own account. OTC trades are bilateral and attract different clearing obligations.

Worked example

A UK pension fund buys 250,000 shares of a FTSE 100 company through a broker on the London Stock Exchange, executed Monday. Reasoning: this is a secondary market trade, so proceeds go to the selling investor, not the issuer. The broker executes; the trade is novated to a CCP for clearing; settlement occurs in the CSD on T+2, book-entry against payment, with the fund's global custodian instructing its sub-custodian. No certificate moves - the CSD debits and credits securities accounts while the cash leg runs through correspondent banks. The issuer is untouched at every stage.

Traps that cost marks

  • Treating the exchange, CCP and CSD as one entity.
  • Claiming the custodian executes or clears trades.
  • Misclassifying a six-month CD as a capital market instrument.
  • Assuming OTC derivatives and cash equities share the same clearing route.
  • Confusing primary issuance documentation with secondary trading documentation.