HKSI LE Paper 7 flashcards

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

SFC dual filing regime

Requires listing applicants and listed issuers to file disclosure documents with the SFC as well as the Exchange, so the SFC can pursue statutory remedies for false or misleading disclosure.

Responsible Officer requirement

A licensed corporation must have at least two approved Responsible Officers, at least one an executive director, each with four years' relevant experience in the past six years.

Investor Compensation Fund limit

The fund compensates investors up to HK$500,000 per investor for losses caused by the default of a licensed intermediary in exchange-traded securities or futures.

CCASS settlement cycle

Hong Kong cash equity trades settle on T+2 through the Central Clearing and Settlement System, which novates trades and collects margin from clearing participants.

Type 9 regulated activity

Asset management: managing a portfolio of securities or futures contracts for another person, including discretionary accounts and SFC-authorised funds.

Uptick rule for short selling

Short sales of designated securities may only be executed at a price at or above the best current bid, preventing sales into a falling market.

Board lot size

The number of shares in one trading unit, set by the issuer in the listing document; orders must generally be in whole multiples of this lot.

H-share versus red chip

An H-share is issued by a Mainland-incorporated company listed in Hong Kong; a red chip is a Hong Kong-listed company incorporated offshore but controlled by Mainland entities.

Rights issue mechanics

An offer of new shares to existing holders pro rata to their holdings, usually at a discount; entitlements are renounceable and may be sold in the market.

Closing Auction Session

A post-continuous-trading auction on HKEX that determines the closing price; orders cannot be cancelled after the no-cancellation period begins.

Modified duration

A measure of a bond's percentage price change for a one percentage point change in yield; it equals Macaulay duration divided by one plus the periodic yield.

Dirty price

The full price paid for a bond, equal to the quoted clean price plus accrued interest from the last coupon date to the settlement date.

Exchange Fund Bills

HKMA-issued Hong Kong dollar paper maturing in 91, 182 or 364 days, sold at a discount and used to manage interbank liquidity.

Credit spread

The difference between the yield on a corporate bond and the yield on a government bond of comparable maturity, reflecting credit and liquidity risk.

Yield to maturity

The single discount rate that equates a bond's future coupons and principal to its current price, assuming coupons are reinvested at that same rate.

Linked exchange rate band

The HK dollar trades between 7.75 and 7.85 per US dollar; the HKMA's convertibility undertaking triggers intervention at these strong-side and weak-side limits.

Covered interest parity

The forward exchange rate differs from spot by the interest rate differential between the two currencies, so hedged borrowing costs equalise across markets.

FX swap

A simultaneous spot purchase and forward sale of one currency against another, used to manage short-term funding and liquidity in a currency.

Transaction exposure

The risk that exchange rate movements change the domestic-currency value of existing foreign-currency receivables, payables or contracted cash flows.

Currency Board backing

The Monetary Base must be fully backed by foreign currency reserves at the Link rate, so interest rates rather than the exchange rate absorb capital flow shocks.

Put-call parity

For European options on a non-dividend stock, call minus put equals spot minus the present value of the strike; deviations permit arbitrage.

Option delta

The change in an option's price for a one-unit change in the underlying price; calls have positive delta and puts negative delta between zero and one.

Interest rate swap

An agreement to exchange fixed-rate and floating-rate interest payments on a notional principal over a set term, used to hedge or alter interest rate exposure.

Variation margin

Daily cash settlement of gains and losses on futures positions, paid to or from the clearing house, keeping counterparty credit risk low.

Capital-protected note

A structured product returning the principal plus a participation in an underlying's upside, typically funded by forgoing interest or accepting a capped return.

SFC-authorised fund

A collective investment scheme approved under the SFC's UT Code for retail sale; authorisation is not a recommendation or guarantee of performance.

NAV per unit

Total fund assets minus liabilities, divided by units outstanding; open-ended funds issue and redeem at this price, adjusted for any fees.

Portfolio variance two assets

The variance of a two-asset portfolio equals the weighted sum of the individual variances plus twice the weighted covariance; lower correlation reduces total risk.

Sharpe ratio

Excess return over the risk-free rate divided by the standard deviation of returns; higher values indicate better risk-adjusted performance.

Sponsor appointment timing

A listing applicant must appoint an independent sponsor at least two months before submitting the Main Board application, and the sponsor must do due diligence.

Mandatory general offer trigger

A person acquiring 30% or more of a listed company's voting rights, or adding 2% or more between 30% and 50% within 12 months, must make a general offer.

Public float requirement

At least 25% of a Main Board issuer's shares must be held by the public, reduced to 15% where market capitalisation at listing exceeds HK$10 billion.

Connected transaction

A transaction between a listed issuer and a connected person, requiring disclosure and independent shareholder approval unless a percentage-ratio exemption applies.