Institutional Client Overview Quiz
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Questions and Answers

What is primarily focused on by institutional investment management firms?

  • Trading for speculative purposes
  • Managing individual client portfolios
  • Providing personal financial advice to retail clients
  • Managing investments for institutional clients (correct)
  • Which of the following is NOT a channel through which institutional investment managers offer their services?

  • Segregated accounts
  • Pooled investment funds
  • Real estate funds (correct)
  • Limited partnerships
  • What is one role of investment dealers in the context of institutional investment management?

  • Creating new regulatory frameworks
  • Providing direct advisory services to corporations
  • Offering personalized investment plans to individuals
  • Buying and selling securities on behalf of their clients (correct)
  • What significant change has influenced the relationship between institutional investment managers and investment dealers in recent years?

    <p>Advancements in electronic trading technology</p> Signup and view all the answers

    How did portfolio managers traditionally communicate security transaction orders before electronic trading became widespread?

    <p>Verbally to the institutional sales staff</p> Signup and view all the answers

    What is the primary goal of a buy-side trader?

    <p>To execute trades at the best prices available in the market.</p> Signup and view all the answers

    In which market conditions might traders feel the need to shop around for the best price?

    <p>Volatile or less liquid markets.</p> Signup and view all the answers

    Which of the following is NOT a criterion for selecting a sell-side broker?

    <p>Critical industry analysis reports.</p> Signup and view all the answers

    What does transaction cost analysis (TCA) primarily evaluate?

    <p>Explicit and implicit costs of trading.</p> Signup and view all the answers

    Which factor is emphasized when evaluating relationships between trading professionals?

    <p>Established mutual trust.</p> Signup and view all the answers

    Which staff member acts as the relationship manager between the institutional client and the dealer?

    <p>Institutional equity sales staff</p> Signup and view all the answers

    What is the primary goal of program trading?

    <p>To exploit price discrepancies between stocks and derivatives</p> Signup and view all the answers

    Which of the following accurately describes equity structured finance?

    <p>It creates derivatives that provide specific risk and reward combinations.</p> Signup and view all the answers

    What type of traders specialize in offering a constant two-sided market for securities?

    <p>Market makers</p> Signup and view all the answers

    Why do many institutional equity investors prefer derivatives over cash equities?

    <p>Derivatives offer a more flexible exposure to equity markets.</p> Signup and view all the answers

    Which of the following best describes the primary difference between buy side and sell side firms?

    <p>Buy side firms typically trade their own capital, while sell side firms primarily facilitate trades for clients.</p> Signup and view all the answers

    Which role primarily involves providing analysis and research services to institutional clients?

    <p>Research associate</p> Signup and view all the answers

    What is the main function of a prime brokerage?

    <p>To offer a suite of services to hedge funds and institutional clients, including financing and trade execution.</p> Signup and view all the answers

    Which type of trading environment is specifically characterized by the use of advanced algorithms and frequent order execution?

    <p>High frequency trading</p> Signup and view all the answers

    Which of the following terms is associated with investment dealers who specifically deal with large institutional clients?

    <p>Institutional salesperson</p> Signup and view all the answers

    Study Notes

    Institutional Client Overview

    • Institutional clients are sophisticated investors like mutual funds, pension funds, and corporate treasuries
    • Sell-side firms facilitate trading for institutional clients
    • Buy-side firms manage investments (funds, etc.) for institutional clients
    • Institutions often have large accounts, requiring specialized services and potentially lower fees

    Learning Objectives

    • Distinguish between sell-side and buy-side roles in the institutional market
    • Identify buy-side portfolio manager and buy-side trader responsibilities
    • Understand sell-side roles (back, middle, front office) relevant to equity sales and trading
    • Describe the revenue sources of equity and fixed-income trading desks on the sell-side
    • Explain institutional settlement processes
    • Define the roles and responsibilities within an institutional investment dealer
    • Distinguish between buy-side investment management styles
    • Define algorithmic trading, high-frequency trading, and dark pools

    Content Areas

    • Sell-Side and Buy-Side of the Market
    • Responsibilities of Buy-Side Portfolio Manager and Trader
    • Organizational Structure of a Sell-Side Trading Firm
    • Institutional Clearing and Settlement
    • Roles and Responsibilities in the Institutional Market
    • Investment Styles, Guidelines, and Restrictions
    • Algorithmic Trading

    Key Terms

    • Agency traders
    • Algorithmic trading
    • Analyst
    • Axe sheets
    • Buy-side
    • Clearing
    • Coverage traders
    • Dark pools
    • Direct electronic access (DEA)
    • High-frequency trading (HFT)
    • Institutional clients
    • Institutional salesperson
    • Institutional trader
    • Investment bankers
    • Liability traders
    • Market makers
    • Order flow
    • Origination
    • Price spread
    • Prime brokerage
    • Proprietary traders
    • Research associate
    • Responsible designated trader
    • Sell-side
    • Settlement
    • Soft-dollar arrangement
    • Straight-through processing (STP)
    • Trade-matching elements
    • Universal Market Integrity Rules

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    Description

    Test your knowledge on the roles and responsibilities of sell-side and buy-side firms in the institutional market. This quiz will help you understand key concepts such as institutional settlement processes, revenue sources in trading desks, and various investment management styles. Perfect for anyone looking to deepen their understanding of institutional clients.

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