Canadian Securities Course Volume 1

Comprehensive vocabulary flashcards covering the key terms of the Canadian investment marketplace, economic indicators, fixed-income features, and equity transactions.

Financial Intermediary

An institution such as a bank or investment dealer that facilitates the transfer of capital by borrowing from suppliers of capital and lending to users of capital.

Self-Regulatory Organization (SRO)

Private industry organizations like IIROC or MFDA to which provincial regulators delegate some powers to establish and enforce industry regulations and ethical practices.

Clearing

The industrial process of confirming and matching the specific details of a security trade between participating parties.

Settlement

The irrevocable transfer of cash and securities between a buyer and a seller to finalize a transaction.

Retail Firm

Investment dealers that primary serve individual investors, including full-service firms and self-directed brokers.

Institutional Firm

Investment dealers that exclusively serve organizations like pension funds and mutual funds that trade large volumes of securities.

Integrated Firm

A large investment dealer that participates in all aspects of the industry, offering products and services to both retail and institutional markets.

Investment Boutique

A smaller investment dealer that specializes in a specific market segment, such as stock trading, bond trading, or unlisted stocks.

Firewall

Information barriers placed within a bank to inhibit the sharing of customer info across different business units, such as between banking and brokerage subsidiaries.

Closed-end Fund

An investment fund that typically issues shares only at startup or at infrequent periods, unlike mutual funds.

Open-end Fund (Mutual Fund)

An investment fund that continually issues shares to new investors and redeems them on demand from existing holders.

Robo-advisor

An online investment service providing goal-based management using algorithms based on modern portfolio theory and online client questionnaires.

Blockchain

A shared public ledger composed of code blocks chained together used to record and validate transactions that cannot be altered.

Representational Capital

Wealth held in the form of financial instruments such as money, stocks, and bonds.

Direct Investment

The use of savings to physically acquire real assets, such as a couple buying a home or a company building a new plant.

Indirect Investment

The purchase of financial instruments like stocks or bonds by an entity with savings, where the issuer uses results for productive purposes.

Primary Market

The market where newly issued securities are sold directly by companies or governments to investors for the first time.

Secondary Market

The marketplace where investors trade previously issued securities among themselves, such as buying stocks on the Toronto Stock Exchange.

Auction Market

A central market where investment dealers execute client orders by matching bids and offers through a single exchange.

Bid-Ask Spread

The mathematical difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept for a security.

Market Maker

An investment dealer that maintains an inventory of securities and quotes bid and ask prices to provide liquidity to the market.

Alternative Trading System (ATS)

An automated electronic marketplace that matches buy and sell orders from multiple participants outside traditional exchanges.

Canadian Securities Administrators (CSA)

An umbrella organization composed of the thirteen provincial and territorial securities regulators aimed at coordinating national standards.

Canadian Investor Protection Fund (CIPF)

An industry fund that provides insurance for eligible customers up to $1,000,000$ in the event of an IIROC dealer member's insolvency.

Arbitration

A method of dispute resolution where an independent party hears facts and imposes a binding decision on the claimant and the firm.

Gatekeeper

The role of investment advisors and firms to guard markets from wrongdoing by identifying suspicious clients and transactions.

Gross Domestic Product (GDP)

The total market value of all final goods and services produced within a country over a specific time period.

Real GDP

A measure of economic output that removes the effects of inflation to reflect true productivity changes from one period to another.

Productivity

An economic measure of output per unit of input, such as GDP produced per unit of labour or capital used.

Leading Indicator

Economic data that tends to reach peaks and troughs before the overall economy, such as housing starts or stock prices.

Lagging Indicator

Economic data that changes only after a broader economic trend has already occurred, such as the unemployment rate or inflation.

Participation Rate

The share of the working-age population ($15$ years and older) that is currently either employed or actively looking for work.

Cyclical Unemployment

Job loss that occurs directly in response to the fluctuations of the business cycle, rising during contractions and falling during expansions.

Frictional Unemployment

The normal labour turnover that happens when people are between jobs, having either quit, been fired, or recently finished school.

Structural Unemployment

Unemployment resulting from a mismatch between the skills workers possess and the skills required for available jobs, often due to technological change.

Natural Unemployment Rate

The minimum level of unemployment in an economy where all resources are fully employed, consisting only of frictional and structural factors.

Nominal Interest Rate

The quoted rate of interest on an investment or loan that has not been adjusted for the effects of inflation.

Real Interest Rate

The nominal interest rate minus the expected rate of inflation, representing the true cost of borrowing or return on savings.

Consumer Price Index (CPI)

A weighted index that monitors changes in the average price of a basket of $600$ goods and services purchased by typical households.

Demand-pull Inflation

Rising price levels across the economy caused by consumer demand outstripping the economy's output capacity.

Cost-push Inflation

Rising price levels resulting from an increase in the costs of production, such as higher wages or raw material prices.

Fiscal Policy

The use of federal government spending and taxation powers to influence economic performance and achieve long-term growth.

Monetary Policy

Policy administered by the central bank to preserve the value of the currency by keeping inflation low, stable, and predictable.

Target for the Overnight Rate

The Bank of Canada's key policy rate set at the midpoint of an operating band where financial institutions lend each other one-day funds.

Bank Rate

The interest rate the central bank charges on one-day loans to major financial institutions; it represents the upper limit of the operating band.

Drawdown

A central bank operation where government deposits are transferred from chartered banks to the Bank of Canada to drain cash from the banking system.

Redeposit

A central bank operation where government deposits are transferred from the Bank of Canada to chartered banks to inject cash into the system.

Par Value

Also called face value, it is the principal amount a bond issuer contracts to pay the holder at the bond's maturity.

Coupon Rate

The fixed annual interest rate paid by a bond issuer, calculated as a percentage of the bond's par value.

Yield to Maturity (YTM)

The total annual return an investor expects on a bond if it is held until maturity, including interest income and capital gains or losses.

Strip Bond

A high-quality bond separated into its individual interest coupons and its residue, which are then sold separately at a discount to face value.

Callable Bond

A bond that gives the issuer the right to redeem the debt prior to the scheduled maturity date at a specified price.

Convertible Bond

A debt security that the holder has the privilege of exchanging for a predetermined number of the issuer's common shares.

Sinking Fund

Sums of money set aside by an issuer from annual earnings to ensure the repayment of all or part of a bond issue by maturity.

Treasury Bill (T-bill)

Non-interest bearing short-term government debt issued and sold at a discount that matures at par value.

Real Return Bond

A bond where the coupon payments and principal repayment are adjusted for inflation based on changes in the Consumer Price Index.

Instalment Debenture (Serial Bond)

A debt instrument commonly used by municipalities where a portion of the total principal matures in each year of its term.

Bankers' Acceptance (BA)

A commercial draft issued by a borrower and guaranteed at maturity by the borrower's bank, typically used for short-term financing.

Guaranteed Investment Certificate (GIC)

A deposit instrument offered by banks with a fixed interest rate for a specific term where the principal and interest are guaranteed.

Present Value

The calculation of the current worth of a sum of money or series of cash flows to be received at a future date.

Duration

A measure of the sensitivity of a bond's price to changes in interest rates, representing the approximate percentage change for a $1$% rate change.

Standard Trading Unit

A uniform size for stock trades on an exchange, which is typically $100$ shares for most stocks.

Ex-dividend Date

The date when a stock begins to trade without the value of its recently declared dividend, set at one business day before the record date.

Restricted Shares

Shares that grant the holder the right to participate in earnings and assets but carry limited or non-voting rights.

Stock Split

A corporate action that increases the number of outstanding shares and reduces the share price without changing total shareholder equity.

Canadian Depositary Receipts (CDRs)

Securities representing fractional ownership of global company shares, trading in Canadian dollars on the NEO Exchange with built-in currency hedging.

Margin Account

A brokerage account that allows an investor to buy or sell securities on partial credit, with the dealer lending the balance of the purchase price.

Short Selling

The sale of borrowed securities that the seller does not own, done in the expectation that the price will fall so they can be repurchased at a lower price.

Long Position

A market position where an investor actually owns a security and benefits if the security's value increases.

Limit Order

An instruction to a broker to buy or sell a security only at a specific price or better.

Stop Loss Order

Also called an on-stop sell order, it is used to automatically sell a security once it drops to a specified price to limit potential losses.

Call Option

A contract giving the holder the right, but not the obligation, to purchase an underlying asset at a specified price within a given time frame.

Put Option

A contract giving the holder the right, but not the obligation, to sell an underlying asset at a specified price within a given time frame.

Forward Contract

A personalized agreement between two parties to trade an underlying asset at a specified price on a specific future date.

Futures Contract

A standardized, exchange-traded agreement to buy or sell an asset at a predetermined price in the future, guaranteed by a clearinghouse.