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Clearing, Settlement and Custody, 2nd Edition

Book Description

Four new chapters and updates throughout help this 2e of Clearing, Settlement and Custody summarize worldwide changes in the process of concluding a financial transaction. Noted consultant David Loader provides a highly detailed analysis of the central clearing counterparty concept, the drivers behind it, and its effects on operations teams. He also clearly illustrates the life cycle of a series of transactions to broaden the comparison process.

Emphasizing changes in the regulatory environment stemming from the 2008 market crash and liquidity crisis, this edition uses new case studies and end-of-chapter quizzes to explore the transaction value chain of trading, clearing, settlement, and custody. Students and professionals in the financial field will benefit from the book's description of the industry and the details of financial innovation and regulatory response, with their many implications.

  • Supplements theoretical insights about risk with empirical data from current cases
  • Provides the first algorithmic risk management technique that spans multiple asset classes
  • End-of-chapter questions reinforce primary and secondary points

Table of Contents

  1. Cover image
  2. Title page
  3. Table of Contents
  4. Copyright
  5. Preface
  6. Chapter 1. The structure of clearing and settlement
    1. Abstract
    2. The clearing house
    3. Changes in clearing
    4. Development of the clearing structures
    5. Objectives of clearing houses
    6. Summary
  7. Chapter 2. The role of the clearing house, trade repositories and central securities depositories
    1. Abstract
    2. The role of the CCP
    3. The role of securities depositories
    4. The role of trade repositories
    5. Summary
  8. Chapter 3. Bond settlement
    1. Abstract
    2. Introduction
    3. International bonds
    4. Domestic bonds
    5. Fixed-rate bonds
    6. Floating-rate notes
    7. Zero coupon bonds
    8. Maturity
    9. Lead manager
    10. Co-lead manager
    11. Market-maker
    12. Trade confirmation
    13. Settlement instruction
    14. International bonds, global bonds and convertible bonds
    15. Government bonds and domestic bonds
    16. Summary
  9. Chapter 4. Equity clearing and settlement
    1. Abstract
    2. Introduction
    3. Issuing and trading equities
    4. Settlement
    5. Corporate actions
    6. Record date
    7. Pay date
    8. Ex-date
    9. Repayment of capital
    10. Stock benefits
    11. Capitalization
    12. Scrip dividends
    13. Stock situations
    14. Summary
  10. Chapter 5. Clearing and settlement of derivatives
    1. Abstract
    2. Introduction
    3. Exchange traded futures and options
    4. OTC derivatives
    5. Further reading
    6. Summary: Useful reference websites
  11. Chapter 6. Custody services
    1. Abstract
    2. Instruction from client to global custodian
    3. Reporting requirements
    4. Pooled nominee system (omnibus)
    5. Corporate actions
    6. Stock situations
    7. Take-overs, mergers and de-mergers
    8. Conversions
    9. Warrant exercise
    10. Pari passu lines of a security
    11. Redemptions and maturity
    12. Share suspension and liquidations
    13. Proxy voting
    14. Asset and cash management
    15. Single-currency accounts
    16. Multi-currency accounts
    17. Interest-bearing accounts
    18. Sweeping
    19. Banking services
    20. Withholding tax
    21. Double-taxation agreements
    22. Investment accounting
    23. Pricing and valuation reporting
    24. Investment analysis
    25. Summary
  12. Chapter 7. Securities lending
    1. Abstract
    2. Introduction
    3. The characteristics of securities lending
    4. Uses of securities lending
    5. Securities lending precautions and controls
    6. The role of the prime brokers/global custodians
    7. Non-discretionary programme
    8. Discretionary (or managed) programme
    9. Benefits and entitlements
    10. Lenders’ rights
    11. Role of the custodian or intermediary
    12. Actions required
    13. Implications for collateral
    14. Repurchase agreement
    15. Summary
  13. Chapter 8. Settlement of portfolio transactions and subscription/redemption of shares and units in investment funds
    1. Abstract
    2. Introduction
    3. Investment fund administration and support
    4. Portfolio administration and fund records
    5. Assets of the fund
    6. Administration workflow
    7. Margin and collateral
    8. Other activities affecting the portfolio administration
    9. Capturing data
    10. Subscription and redemption of shares and units in investment funds
    11. Summary
  14. Chapter 9. Risk and regulation
    1. Abstract
    2. Contents
    3. Risk
    4. Clearing and settlement risk
    5. Regulation
  15. Glossary
  16. Index