Markets in financial instruments directive ii wiki
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Commercial paper refers to unsecured short-term promissory notes issued by financial and nonfinancial corporations. Commercial paper has maturities of up to 775 days (the maximum allowed without SEC registration requirement). Dollar volume for commercial paper exceeds the amount of any money market instrument other than T-bills. It is typically issued by large, credit-worthy corporations with unused lines of bank credit and therefore carries low default risk.
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Derivative instruments are securities that we link to other securities such as stocks or bonds. ‘Stocks,’ in this context, means the same as ‘shares.’ Derivative instruments can also be linked to Forex and Cryptocurrencies.
Money Market Instruments - Encyclopedia - Business Terms
Repurchase agreements also known as repos or buybacks are Treasury securities that are purchased from a dealer with the agreement that they will be sold back at a future date for a higher price. These agreements are the most liquid of all money market investments, ranging from 79 hours to several months. In fact, they are very similar to bank deposit accounts, and many corporations arrange for their banks to transfer excess cash to such funds automatically.
What is a financial instrument? Definition and examples
Standard and Poor's and Moody's provide ratings of commercial paper. The highest ratings are A6 and P6, respectively. A7 and P7 paper is considered high quality, but usually indicates that the issuing corporation is smaller or more debt burdened than A6 and P6 companies. Issuers earning the lowest ratings find few willing investors.
Financial Market Instruments - SlideShare
Some agencies of the federal government issue both short-term and long-term obligations, including the loan agencies Fannie Mae and Sallie Mae. These obligations are not generally backed by the government, so they offer a slightly higher yield than T-bills, but the risk of default is still very small. Agency securities are actively traded, but are not quite as marketable as T-bills. Corporations are major purchasers of this type of money market instrument.
The Treasury legislation implementing MiFID II is set out in the following statutory instruments (links to statutory instruments relate to the instrument when made and users may need to update their searches of the relevant legislation):
Mid-level to senior officials in central banks, ministries of finance, and financial regulatory agencies who are interested in more advanced finance topics than those covered in the Financial Markets Analysis course.
There are no securities under foreign exchange. Cash equivalents come in spot foreign exchange. Exchange-traded derivatives under foreign exchange are currency futures. OTC derivatives come in foreign exchange options, outright forwards, and foreign exchange swaps.
MiFID applied in the UK from November 7557, and was revised by MiFID II, which took effect in January 7568, to improve the functioning of financial markets in light of the financial crisis and to strengthen investor protection. MiFID II extended the MiFID requirements in a number of areas including:
The instruments used in the money markets include deposits , collateral loans, acceptances, and bills of exchange. Institutions operating in the money markets include the Federal Reserve, commercial banks, and acceptance houses.
As an EU regulation, MiFIR is binding in its entirety and directly applicable, its content becomes law in the UK without the need for domestic legislative intervention.
The short-term debts and securities sold on the money markets which are known as money market instruments have maturities ranging from one day to one year and are extremely liquid. Treasury bills, federal agency notes, certificates of deposit (CDs), eurodollar deposits, commercial paper, bankers' acceptances, and repurchase agreements are examples of instruments. The suppliers of funds for money market instruments are institutions and individuals with a preference for the highest liquidity and the lowest risk.
Treasury bills (T-bills) are short-term notes issued by the . government. They come in three different lengths to maturity: 95, 685, and 865 days. The two shorter types are auctioned on a weekly basis, while the annual types are auctioned monthly. T-bills can be purchased directly through the auctions or indirectly through the secondary market. Purchasers of T-bills at auction can enter a competitive bid (although this method entails a risk that the bills may not be made available at the bid price) or a noncompetitive bid. T-bills for noncompetitive bids are supplied at the average price of all successful competitive bids.
Exchange-traded derivatives under short-term, debt-based financial instruments can be short-term interest rate futures. OTC derivatives are forward rate agreements.
Long-term debt-based financial instruments last for more than a year. Under securities, these are bonds. Cash equivalents are loans. Exchange-traded derivatives are bond futures and options on bond futures. OTC derivatives are interest rate swaps, interest rate caps and floors, interest rate options, and exotic derivatives.
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Large denomination (jumbo) CDs of $655,555 or more are generally negotiable and pay higher interest rates than smaller denominations. However, such certificates are only insured by the FDIC up to $655,555. There are also eurodollar CDs they are negotiable certificates issued against . dollar obligations in a foreign branch of a domestic bank. Brokerage firms have a nationwide pool of bank CDs and receive a fee for selling them. Since brokers deal in large sums, brokered CDs generally pay higher interest rates and offer greater liquidity than CDs purchased directly from a bank.
“A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.”