IFMP Fundamentals of Capital Markets Certification (FCM), Pakistan flashcards
IFMP Fundamentals of Capital Markets Certification (FCM), Pakistan · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Primary market
- The segment where new securities are issued and sold to investors, with proceeds flowing to the issuer. Examples include IPOs, rights issues, and further public offers.
- Secondary market
- The segment where already-issued securities trade between investors. Proceeds go to the selling investor, not the issuing company, and prices are set by supply and demand.
- Money market
- The market for short-term debt instruments maturing within one year, such as treasury bills and commercial paper. It supports liquidity management rather than long-term capital raising.
- Capital market
- The market for medium- and long-term securities such as equities and bonds. It channels savings into productive investment by governments and companies.
- Initial public offering
- The first sale of shares by a private company to the public, listing it on an exchange. It raises fresh capital for the issuer and creates a secondary market for the stock.
- Rights issue
- An offer of new shares to existing shareholders, usually at a discount, in proportion to their holdings. It lets the company raise capital while letting holders avoid dilution.
- SECP
- The Securities and Exchange Commission of Pakistan, the statutory regulator of Pakistan's capital markets. It licenses intermediaries, approves listings, and enforces disclosure and conduct rules.
- Pakistan Stock Exchange
- The principal equity exchange of Pakistan, operating trading, listing, and market surveillance under SECP oversight. Its benchmark index is the KSE-100.
- KSE-100 Index
- The benchmark index of the Pakistan Stock Exchange, tracking 100 selected listed companies. It is typically market-capitalisation weighted and used as a broad market performance gauge.
- CDC
- The Central Depository Company of Pakistan, which holds securities in electronic book-entry form. It enables settlement without physical share certificates and maintains investor sub-accounts.
- NCCPL
- The National Clearing Company of Pakistan, which clears and settles trades executed on PSX. It manages the settlement guarantee and the clearing member framework.
- T+2 settlement
- A settlement convention in which a trade is settled two business days after execution. The buyer pays and the seller delivers securities on the settlement date.
- TREC holder
- A broker holding a Trading Right Entitlement Certificate, the licence to execute trades on PSX. The certificate is granted and regulated by SECP.
- Market order
- An instruction to buy or sell immediately at the best available price. Execution is certain but the price is not, so it carries price risk in thin markets.
- Limit order
- An instruction to trade only at a specified price or better. A buy limit sits below the market; a sell limit sits above it, and execution is not guaranteed.
- Stop order
- An order that becomes a market order once a trigger price is reached. It is used to limit losses or enter positions on breakouts, but slippage is possible.
- Bid-ask spread
- The difference between the best ask and best bid price. It compensates liquidity providers and serves as a simple measure of transaction cost and market liquidity.
- Market maker
- A participant that continuously quotes both bid and ask prices, providing liquidity and depth. Market makers earn the spread while bearing inventory risk.
- Custodian
- A financial institution that safekeeps client securities and handles settlement, corporate actions, and reporting. Institutional investors typically hold assets through a custodian.
- Book-entry securities
- Securities recorded electronically on a depository's register rather than as physical certificates. Ownership transfers by account entry, which speeds settlement and reduces fraud risk.
- Dividend
- A distribution of company profits to shareholders, usually paid in cash or shares. The board declares it, and it reduces retained earnings.
- Ex-dividend date
- The date from which a buyer of shares no longer qualifies for the declared dividend. Trades on or after this date exclude the dividend entitlement.
- Bonus shares
- Additional shares issued to existing holders free of charge, funded from reserves. Total value is unchanged, but the share price adjusts proportionally.
- Stock split
- A division of existing shares into a larger number of lower-priced shares. Market capitalisation is unchanged; only the number of shares and the price per share change.
- Face value
- The nominal amount stated on a security, used to compute coupon payments and redemption proceeds. It differs from market price, which fluctuates with supply and demand.
- Coupon rate
- The fixed annual interest rate a bond pays, expressed as a percentage of face value. Coupon income is normally paid semi-annually or annually until maturity.
- Yield to maturity
- The annualised return earned if a bond is held to maturity, assuming coupons are reinvested. It equates the present value of cash flows to the market price.
- Bond price-yield relationship
- Bond prices move inversely to yields. When market yields rise, the present value of fixed cash flows falls, so the bond price declines.
- Treasury bill
- A short-term government security issued at a discount and redeemed at face value. It carries sovereign credit and matures within one year.
- Pakistan Investment Bond
- A long-term government debt security issued by the State Bank of Pakistan on behalf of the government. It pays periodic coupons and serves as a benchmark yield curve instrument.
- Systematic risk
- Risk affecting the whole market, such as inflation, interest rates, or political shocks. It cannot be eliminated by diversification and is measured by beta.
- Unsystematic risk
- Company- or sector-specific risk, such as management failure or product recalls. It can be reduced through diversification across unrelated holdings.