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GSO Syllabus V8a - PDF
GSO Syllabus V8a - PDF
LEVEL 3
CERTIFICATE IN INVESTMENT OPERATIONS
UNIT 6
GLOBAL SECURITIES OPERATIONS
The objective of the examination is to ensure that candidates have an introduction to global securities
services and administration as far as this relates to the needs of operations and administration staff.
The examination will test candidates’ knowledge and understanding of the following elements:
• Securities
• Main Industry Participants
• Settlement Characteristics
• Other Investor Services
• Aspects of Taxation
• Risk
For the purpose of this syllabus the selected markets referred to herein are defined as:
UK; US; Japan; Australia; Euronext; Germany; Spain; India; Hong Kong; Singapore; Korea; Brazil
SYLLABUS STRUCTURE
The unit is divided into elements. These are broken down into a series of learning objectives.
Each learning objective begins with one of the following prefixes: know, understand or be able to
calculate. These words indicate the different levels of skill to be tested. Learning objectives prefixed:
• know require the candidate to recall information such as facts, rules and principles
• be able to calculate require the candidate to be able to use formulae to perform calculations
CANDIDATE UPDATE
Candidates are reminded to check the ‘Candidate Update’ area of the Institute’s website (cisi.org) on a
regular basis for updates that could affect their examination as a result of industry change.
EXAMINATION SPECIFICATION
Each examination paper is constructed from a specification that determines the weightings that will be
given to each element. The specification is given below.
It is important to note that the numbers quoted may vary slightly from examination to examination as there
is some flexibility to ensure that each examination has a consistent level of difficulty. However, the
number of questions tested in each element should not change by more than plus or minus 2.
Examination specification
50 multiple choice questions
ASSESSMENT STRUCTURE
Candidates sitting the examination by Computer Based Testing will have, in addition, up to 10%
additional questions as trial questions that will not be separately identified and do not contribute to the
result. Candidates will be given proportionately more time to complete the test.
SUMMARY SYLLABUS
ELEMENT 1 SECURITIES
1.1 Securities
1.2 Principles of Trading
ELEMENT 2 MAIN INDUSTRY PARTICIPANTS
2.1 Investors and Custody Service Suppliers
2.2 International Central Securities Depositories and Central Securities Depositories
2.3 Communications and Technology
ELEMENT 3 SETTLEMENT CHARACTERISTICS
3.1 Pre-settlement
3.2 Settlement
3.3 Failed Settlement
ELEMENT 4 OTHER INVESTOR SERVICES
4.1 Safekeeping
4.2 Corporate Actions
4.3 Cash Management
4.4 Securities Lending
ELEMENT 5 ASPECTS OF TAXATION
5.1 General
ELEMENT 6 RISK
6.1 Identifying and Managing Risk
6.2 Mitigating Risk through Reconciliation
ELEMENT 1 SECURITIES
1.1 Securities
On completion, the candidate should:
• ranking in liquidation
• dividends
• deferred shares
• registration
• transfer restrictions
• ranking in liquidation
• dividends
• participating
• redeemable
• convertible
• Depositary Interest
• rights
• purpose
• detachability
• corporate bonds
• eurobonds
• convertible bonds
• government bonds
• discount securities
• mutual funds
• hedge funds
• investment trusts
• private equity
• ISIN
• CUSIP
• SEDOL
• tickers
• equities:
o offers for subscription
o offers for sale
o introductions
o placing
o offer to tender
• government bonds:
o auction
o tap
o tranche
• eurobonds:
o lead manager
o syndicate
o underwriting
1.2.1 know the characteristics of the Regulated Markets and Multilateral Trading Facilities
(MTFs)
• on exchange / MTF
• principal trading
• agent trading
• dark pools
• sales traders
• proprietary traders
1.2.5 know the principles of programme trades, algorithmic trading and high frequency
trading
1.2.7 know the settlement periods for equities and bonds in the selected markets
• individual
• institutional
• investment manager
• prime broker
• broker
• inter-dealer broker
• investment bank
• central bank
2.1.2 understand the advantages, disadvantages and purposes of the following types of
custodian:
• global
• sub-custodian
2.1.3 understand the purpose and provisions of custody and sub-custody agreements
2.1.4 understand the purpose of a Request For Proposal (RFP) in the selection of a global
custodian by an investor
2.1.5 understand the requirements of a Service Level Agreement between an investor and
its custodian
2.2.1 understand the roles of ICSDs and CSDs generally for the selected markets:
• depositories available
• participation requirements
2.2.3 understand the roles played by Euroclear and Clearstream including the Bridge
2.2.4 know how securities and cash are held by ICSDs and CSDs
2.2.5 know the range of custody and settlement services offered by the ICSDs
2.3.2 know the features and benefits of SWIFT and SWIFT messaging
2.3.4 know the communication methods used with Euroclear and Clearstream
3.1 Pre-settlement
On completion, the candidate should:
3.1.2 understand the process of clearing (matching and the assumption of risk – trade for
trade versus central counterparty)
3.1.3 understand the role of third party service providers in the pre-settlement process e.g.
OMGEO
3.2 Settlement
On completion, the candidate should:
3.2.1 know the role of the following types of financial institutions in the settlement process:
• brokers
• investment banks
• investment managers
• custodians
• sub-custodians
• CHIPS
• CHAPS
• TARGET 2
• Fedwire
• CLS
• rolling settlement
• physical settlement
• bearer
• registered
3.2.5 understand Contractual Settlement Date Accounting (CSDA) and Actual Settlement
Date Accounting (ASDA)
3.2.6 know the main Giovannini Barriers to the creation of a harmonised market for
Europe
• failure to match
• insufficient stock
• insufficient cash
• counterparty default
• corporate event
• buy-ins
• sell-outs
• interest claims
• settlement fines
• matching fines
• suspension of trading
3.3.3 understand interest claims (ICMA rules on fixed income and ISITC for equities)
4.1 Safekeeping
On completion, the candidate should:
• to safeguard assets
4.1.3 understand the functions of nominee companies and the following concepts:
• legal title
• beneficial ownership
• omnibus accounts
• segregated accounts
4.1.4 understand how a custodian charges for the services it provides to its clients
4.1.5 be able to calculate the cost of custody for a given portfolio given a value of assets
held and the basis point price
• capitalisation issues
• conversions
• takeovers
• exchanges
• proxy voting
• exercise of warrants
4.2.3 understand the importance of receiving timely and accurate corporate action data
and the risks involved
4.2.4 understand the following terms: record date; ex date; pay date; effective date; cum
benefit; ex benefit and special ex and special cum
4.2.5 be able to calculate corporate actions related data on capitalisations, scrip and rights
issues and the effect on the underlying share price
4.3.2 understand the advantages and disadvantages of operating single and multi-
currency accounts
4.3.3 know what is meant by the terms sweeping and pooling as they relate to base
currency and settlement currency
4.4.1 understand the role of a custodian in securities lending and the risks and rewards to
those involved
4.4.2 know the definition, legal ownership implications and the advantages and
disadvantages to the market
4.4.6 understand the lenders’ and borrowers’ rights (including manufactured dividends and
voting rights)
5.1 General
On completion, the candidate should:
• withholding tax
• relief at source
• tax reclamation
• FATCA rules
ELEMENT 6 RISK
• market
• counterparty
• issuer
• settlement
• operational
• political
• regulatory
6.1.2 understand the factors that should be taken into account when conducting risk
reviews of market infrastructures and sub-custodian networks
6.1.3 understand the areas of global custody risk and appropriate countermeasures
6.2.1 understand the risks associated with a failure to reconcile the following:
• open trades
• counterparty cash
• corporate actions
• cash accounts
• custodian holdings
• client assets
• entitlements