CISI IoI UK Financial Markets Overview

Question 1

What is the primary function of the London Stock Exchange (LSE)?

Accepted Answer

To provide a marketplace where buyers and sellers can trade shares and other securities

Answer

To regulate all financial services firms in the UK

Answer

To set UK interest rates

Answer

To insure UK bank deposits

Question 2

What is the difference between the primary market and the secondary market?

Accepted Answer

The primary market is where new securities are first issued; the secondary market is where already-issued securities are traded between investors

Answer

The primary market trades government bonds; the secondary market trades corporate bonds

Answer

The primary market is regulated; the secondary market is unregulated

Answer

The primary market is for retail investors; the secondary market is for institutions only

Question 3

What is the role of a 'market maker' on the London Stock Exchange?

Accepted Answer

To provide continuous two-way prices (bid and offer) for securities, ensuring market liquidity

Answer

To regulate trading activity and prevent fraud

Answer

To advise companies on their initial public offerings

Answer

To collect stamp duty on share transactions

Question 4

What does the term 'gilts' refer to in UK financial markets?

Accepted Answer

UK government bonds issued by HM Treasury

Answer

Shares in FTSE 100 companies

Answer

Corporate bonds issued by blue-chip UK companies

Answer

Equity ETFs listed on the London Stock Exchange

Question 5

What is the FTSE 100 index?

Accepted Answer

An index of the 100 largest companies listed on the London Stock Exchange by market capitalisation

Answer

An index of the 100 largest UK government bonds by value

Answer

An index measuring UK consumer price inflation

Answer

An index of the 100 most traded currencies against sterling

Question 6

What is 'stamp duty reserve tax' (SDRT) and when does it apply?

Accepted Answer

A 0.5% tax on the purchase of UK shares traded electronically through CREST

Answer

A tax on property purchases paid to HMRC

Answer

A tax on bond interest payments

Answer

A duty applied when shares are transferred as a gift