What is the role of a financial custodian? –
A custodian or custodian bank is a financial institution that holds customers’ securities for safekeeping to prevent them from being stolen or lost. Custodians are responsible for the safety of assets and securities and provide services that include trade settlement, investing cash balances as directed, collecting income, processing corporate actions, providing valuation of securities positions, and providing recordkeeping and reporting services.
What is the role of a financial exchange? –
An exchange is a marketplace where securities, commodities, derivatives and other financial instruments are traded. The core function of an exchange is to ensure fair and orderly trading and the efficient dissemination of price information for any financial instrument trading on that exchange.
What is the role of financial regulators? –
A regulator authorizes, supervises and regulates, financial institutions operating in a country to ensure the soundness of the overall banking and financial system. This supervision enables financial institutions to operate and provide efficient banking and financial services.
RISKS AND OPPORTUNITIES FOR CORPORATES AND INDIVIDUAL INVESTORS – Portfolio Diversification –
Portfolio diversification is the process of investing your money in different asset classes and securities in order to minimize the overall risk of the portfolio.
For both corporate and individual investors, having access to markets that enable the building of a diversified portfolio is an important consideration when managing futures focused accounts.
Similar to managing risk, the market to trade would be a key variable to clearly state and support with reasons for trading or investing. Reasons for selecting one market over another could include price volatility, liquidity, daily volume traded, size of the minimum price increment, and value of the minimum price increment. Comparing these variables between markets will help decide the suitability and/or risk of each.
For example, the parameters for a price driven strategy may be designed to be applied to any market whether it be index equity futures or forex futures. However, the signals for entry may not always trigger if a trader were just to focus on a single index equity futures such as the Micro MSCI USA Index futures.
Having access to other futures markets to apply the strategy to allow for the creation of a diversified portfolio with varying entry and exit points or the ability for more trading oriented investors increased opportunities to execute price driven strategies more often across a range of futures markets.
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TRADDICTIV · Research Team