FIA Financial Technology & Systems 4 — Questions and Answers
Question 1: In financial systems, what is the primary function of a 'reconciliation' process?
- To execute trades at the best available price
- To compare records from two or more sources to identify and resolve discrepancies (Correct answer)
- To encrypt transaction data before storage
- To compress historical data for archival purposes
Correct answer: To compare records from two or more sources to identify and resolve discrepancies
Reconciliation compares records across different systems (e.g., broker vs. custodian) to ensure they agree and to investigate any breaks.
Question 2: What is the T+2 settlement standard in US equity markets?
- Trades must be confirmed within 2 hours of execution
- The final exchange of securities and cash occurs 2 business days after trade date (Correct answer)
- Margin calls must be met within 2 trading days
- Regulatory reports are due 2 days after quarter end
Correct answer: The final exchange of securities and cash occurs 2 business days after trade date
T+2 means the actual transfer of securities and payment is completed two business days after the trade is executed.
Question 3: Which type of database architecture is most commonly used by financial institutions for high-volume transaction processing systems?
- Document-oriented NoSQL databases
- Graph databases
- Relational databases with ACID compliance (Correct answer)
- Time-series databases
Correct answer: Relational databases with ACID compliance
Relational databases with ACID (Atomicity, Consistency, Isolation, Durability) properties are preferred for financial transactions because they guarantee data integrity.
Question 4: In the context of financial technology, what does 'API-first' architecture mean?
- Building the user interface before the backend logic
- Designing systems so that all functionality is accessible via APIs from the outset (Correct answer)
- Using only government-approved APIs for regulatory reporting
- Prioritizing API security over performance
Correct answer: Designing systems so that all functionality is accessible via APIs from the outset
API-first means designing and building APIs before other components so that all functionality can be consumed programmatically by any client.
Question 5: What is 'tokenization' in the context of payment security?
- Converting physical currencies into digital tokens for blockchain use
- Replacing sensitive card data with a non-sensitive substitute value (Correct answer)
- Generating one-time passwords for two-factor authentication
- Encrypting transaction data with a public key
Correct answer: Replacing sensitive card data with a non-sensitive substitute value
Payment tokenization replaces sensitive card numbers with a unique token, so merchants never store actual card data, reducing breach risk.
Question 6: Which of the following best describes 'cloud bursting' in financial IT infrastructure?
- Moving all banking operations to a public cloud provider
- Using public cloud resources to handle traffic spikes beyond on-premise capacity (Correct answer)
- Encrypting data before uploading it to cloud storage
- Distributing data across multiple cloud regions for redundancy
Correct answer: Using public cloud resources to handle traffic spikes beyond on-premise capacity
Cloud bursting allows financial firms to scale into public cloud resources during peak demand periods while keeping baseline workloads on-premise.
Question 7: What is the main purpose of a 'data lake' in financial services analytics?
- To store only structured data from trading systems in a pre-processed format
- To store large volumes of raw data in native format until needed for analysis (Correct answer)
- To provide real-time market data to trading algorithms
- To archive regulatory reports for long-term compliance storage
Correct answer: To store large volumes of raw data in native format until needed for analysis
A data lake stores vast amounts of raw, unstructured, and structured data at scale, allowing analysts to process and query it as needed.
FIA Financial Technology & Systems 4
In financial systems, what is the primary function of a 'reconciliation' process?