Financial Markets Practice Flashcards

Comprehensive practice flashcards defining key regulators, market participants, instruments, and mechanisms within the Indian and global financial systems based on the lecture series.

Financial Stability and Development Council (FSDC)

The apex coordination council chaired by the Finance Minister that includes the heads of all financial regulators ($RBI$, $SEBI$, $IRDAI$, and $PFRDA$) to manage systemic risk.

IFSCA

The International Financial Services Centres Authority, a unified regulator for $GIFT\text{ City IFSC}$ that combines the powers of the $RBI$, $SEBI$, $IRDAI$, and $PFRDA$ for offshore operations.

DICGC

Deposit Insurance and Credit Guarantee Corporation; the deposit insurance arm of the $RBI$.

Primary Market

The segment of the capital market where new securities are born and issued for the first time via routes like $IPOs$, $FPOs$, and $Rights Issues$.

Secondary Market

The trading venue for existing securities between investors on exchanges like $NSE$ and $BSE$, providing liquidity and price discovery.

Book Building

A price discovery mechanism used in $IPOs$ where a price band is set and investors bid on the quantity and price of shares.

ASBA

Application Supported by Blocked Amount; a system where the money for an $IPO$ application is blocked in the investor's bank account instead of being debited immediately.

Novation

The process by which a Clearing Corporation becomes the central counterparty ($CCP$) to every trade, acting as the buyer to every seller and the seller to every buyer to eliminate counterparty risk.

$T+1$ Settlement

The cycle where the movement of funds and securities occurs within $1$ working day after the trade date.

DIIs

Domestic Institutional Investors, such as Indian mutual funds ($SBI\text{ MF}$, $HDFC\text{ MF}$), insurers ($LIC$), and pension funds ($EPFO$, $NPS$).

FPIs

Foreign Portfolio Investors, such as sovereign wealth funds and global funds ($BlackRock$, $Vanguard$), who drive market flows and sentiment.

Primary Dealers (PDs)

Specialized entities mandated to underwrite and provide market-making services for government securities auctions.

G-Secs

Dated government securities with maturities of $5$ to $50$ years; they are the risk-free benchmark and are $SLR\text{-eligible}$.

Treasury Bills (T-Bills)

Short-term sovereign debt instruments issued at a discount with maturities of $91$, $182$, and $364$ days.

Commercial Paper (CP)

An unsecured short-term promissory note issued by corporates and $NBFCs$ for working capital, typically with a tenor of $7\text{ days}$ to $1\text{ year}$.

Certificate of Deposit (CD)

A negotiable money market instrument issued by banks to raise bulk short-term funding for periods up to $1\text{ year}$.

Call Money

An uncollateralized interbank market for short-term funds, usually with an overnight tenor.

Weighted Average Call Rate (WACR)

The operating target of the $RBI$'s monetary policy, representing the average cost of overnight interbank funds.

Repo Rate

The policy rate at which banks borrow overnight from the $RBI$ against government securities collateral.

Standing Deposit Facility (SDF)

The floor of the monetary policy corridor where banks can park surplus cash with the $RBI$ without requiring collateral.

Marginal Standing Facility (MSF)

The ceiling of the monetary policy corridor for emergency overnight borrowing from the $RBI$ at a higher rate.

TREPS

Tri-party Repo; a collateralized borrowing and lending system for banks, mutual funds, and insurers.

DRHP

Draft Red Herring Prospectus; the initial disclosure document filed with $SEBI$ by a company intending to go public.

OFS

Offer for Sale; a route where existing promoters or shareholders sell their stake through an exchange window, with the company receiving no fresh capital.

QIP

Qualified Institutions Placement; a fast route for listed companies to raise capital by placing shares privately with institutional investors.

Circuit Breakers

Index-wide or stock-level price bands that halt trading during extreme moves ($\text{±}10$, $15$, or 20\text{%}) to curb panic.

Minimum Public Float (MPS)

The requirement that a listed company must eventually reach at least 25\text{%} public shareholding.

Credit Rating Agencies (CRAs)

Entities like $CRISIL$, $ICRA$, and $CARE$ that assign ratings from $AAA$ to $D$ to debt instruments based on default risk.

NDS-OM

Negotiated Dealing System-Order Matching; the $RBI$-owned electronic matching platform for secondary trading of $G\text{-Secs}$.

NAV

Net Asset Value; the value of a mutual fund scheme's assets minus its liabilities, expressed on a per-unit basis.