A Company’s Exit From Financial Instrument

A COMPANY’S EXIT FROM FINANCIAL INSTRUMENT AS THE COMPANY APPROACHES ITS LAST STAGES

Exiting from a financial instrument we should consider an exit strategy. An exit strategy is a strategy that is executed by business owners investors traders to liquidate their position in a financial asset upon meeting certain criteria

A company can exit a financial instruments by the following means algorithmic trading , direct electronic access ,acting as a general clearing member and synchronisation of business clocks.

Algorithmic trading is a method of executing a large order using automated pre-programmed trading instructions accounting variables such as time price and volume to send small slices of the order out of the market over time.The term is also used to refer to mean automated trading system .Such systems run strategies market making a profit even as its declining.

Direct trading is an arrangement where the company of a trading venue permits a person to use its trading code so that the person can electronically transmit orders relating to financial instrument directly to the trading venue and includes arrangements which involve the use by a person of the infrastructure of the member or participant.

During the declining stage the company uses the service bureaus this are technology company that provide order routing and connectivity services for both the intermediaries and institutional customers. The  company also acts as general clearing member this is where the company imposes requirements on the persons to whom the financial instruments are being provided to reduce the risk to the firm even at the declining stage .The company has a binding agreement with the person to whom it is providing clearing services detailing the essential rights and obligations of both parties arising from the provision of services.

Synchronisation of business clocks a company tend to use business clocks to monitor the performance of the financial instrument. Even at the final stages the company requires that all trading venues and their members or participants synchronise the business clocks that records the dates and time of any reportable events.

A Company’s Exit From Financial Instrument

THE CONTINUUM OF MODERN FINANCIAL PRODUCTS

Financial instruments can be created with any combination of risk protection, yield and potential gain. It is useful to be able to set them on a continuum, showing which are riskier for the investor and how the potential returns might change.

The continuum runs from secured debt as the safest instrument upto the ordinary shares capital as the riskiest. Other securities are shown on points on the risk return continuum between these two extremes

References

Article17(6) of MIFIP and MIFID RT6 specifying the organizational requirement of investment firms acting as general clearing

The Financial Services and Markets Act 2000

Amendments of markets in financial instruments and regulation

A Company’s Exit a Financial Instrument

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