CSC Volume 1 Summary

principal

The person for whom a broker executes an order, or a dealer buying or selling for its own account. May also refer to a person’s capital or to the face amount of a bond.

fintech

Financial technology companies that take advantage of computer technology to support or enable a variety of financial products and services.

agent

The role of an investment dealer when it acts on behalf of a buyer or a seller of a security and does not itself own title to the securities at any time during the transaction.

investment dealer

A company that acts as an intermediary by matching investors with the users of capital.

clearing

The process of confirming and matching security trade details.

mutual fund

Investment fund using proceeds from shares and units sold to investors to invest in financial securities, redeemable on demand from the fund at the current net asset value per share.

schedule III bank

A type of bank that is federally regulated and is a foreign bank branch of a foreign institution.

settlement

The irrevocable moment when cash and securities are exchanged.

firewall

Policies intended to separate and isolate investment decision-making persons in a firm from others in the firm who have undisclosed material information that could influence those decisions.

discount broker or self-directed broker

Brokerage house that buys and sells securities for clients at a greater commission discount than full-service firms.

closed-end fund

Shares in this investment fund type are readily transferable in the open market and are bought and sold like other shares. Capitalization is fixed.

integrated firm

A type of firm that offers products and services across the financial industry and participates fully in both the retail and institutional markets.

schedule I bank

Type of bank that is Canadian-owned and regulated by the Bank Act.

schedule II bank

Type of bank that is incorporated and operates in Canada as a federally regulated foreign bank subsidiary.

pension fund

A type of fund that manages a pool of assets with the goal of supplying its beneficiaries with income during their retirement years.

sales finance company

A type of financial intermediary that purchases instalment sales contracts from retailers and dealers at a discount.

CDS Clearing and Depository Services Inc.

Provides electronic clearing services; physical and electronic facilities to deposit and withdraw depository-eligible securities; management of related ledger positions.

robo-advisor

An online investment service that provides clients with automated investment advice.

Canadian Unlisted Board

The Ontario web-based system to which the trades of unlisted securities are reported.

primary market

The market where newly issued securities are sold by companies and governments to investors.

alternative trading system

Privately-owned computerized networks that match orders for securities outside of recognized exchange facilities. Also referred to as Proprietary Electronic Trading Systems (PETS).

Montreal Exchange

An exchange that deals exclusively with non-agricultural options and futures in Canada.

auction market

Market in which securities are bought and sold by brokers acting as agents for their clients.

Toronto Stock Exchange

The largest stock exchange in Canada with over 1,700 companies listed on the exchange.

stock exchange

An auction market where buyers and sellers of securities meet to trade based on the laws of supply and demand.

investment advisor

An individual licensed to transact in the full range of securities. The term refers to employees of CIRO member firms only. Also known as a Registrant or Registered Representative (RR).

common share

Securities representing ownership in a company. They carry voting privileges and are entitled to the receipt of dividends, if declared.

bid price

The highest price a buyer is willing to pay for the financial instrument being quoted.

institutional investor

Organizations, such as pension and mutual fund companies, that trade in large-share quantities or dollar amounts.

dealer market

Also referred to as the unlisted market. Securities are bought and sold over-the-counter with dealers acting as principals when buying and selling securities for clients.

ask price

The lowest price a seller will accept for the financial instrument being quoted.

money market

That part of the capital market in which short-term financial obligations are bought and sold.

liquidity

The ability of the market for a particular security to absorb a reasonable amount of buying or selling at reasonable price changes.

secondary market

The market where investors trade securities that have already been issued.

bid-ask spread

The difference between the bid price and ask price.

TSX Venture Exchange

Canada’s public venture marketplace, the result of the merger of the Vancouver and Alberta Stock Exchanges in 1999.

Office of the Superintendent of Financial Institutions (OSFI)

Federal regulatory agency whose main responsibilities regarding insurance companies and segregated funds are to ensure that the companies issuing the funds are financially solvent.

gatekeeper

Role of dealers and all of their employees who are responsible for protecting the markets from potentially illegal client activities; Universal Market Integrity Rules set out specific rules.

National Registration Database (NRD)

A web-based system that permits mutual fund salespersons and investment advisors to file applications for registration electronically.

investment representative

A person who is licensed to sell securities but is not permitted to give investment advice.

front running

Making a practice, directly or indirectly, of taking the opposite side of the market to clients, or effecting a trade for the advisor’s own account before effecting a trade for a client.

Ombudsman for Banking Services and Investments (OBSI)

Independent organization that investigates customer complaints against financial services providers.

full, true, and plain disclosure

The general principle underlying Canadian securities legislation. All pertinent facts by those offering securities for sale to the public must be disclosed.

Canadian Investor Protection Fund (CIPF)

Protects eligible customers in the event of the insolvency of an SRO dealer member.

Canadian Securities Administrators (CSA)

Forum for the 13 securities regulators of Canada’s provinces and territories to co-ordinate and harmonize the regulation of the Canadian capital markets.

arbitration

A method of dispute resolution in which an independent arbitrator is chosen to assist aggrieved parties recover damages.

self-regulatory organization (SRO)

Recognized by Securities Administrators, with powers to establish and enforce industry regulations to protect investors and to maintain fair, equitable, and ethical practices in the industry.

National Do Not Call List

A list, administered by the CRTC, where Canadians can register their telephone numbers to prohibit telemarketers and clients of telemarketers from calling the number.

Canada Deposit Insurance Corporation (CDIC)

A federal Crown Corporation providing deposit insurance against loss (up to $100,000 per depositor) when a member institution fails.

Autorite des marches financiers (AMF)

Administers the regulatory framework surrounding Québec’s financial sector including securities, distribution of financial products and services, and financial institutions.

Phillips curve

A graph showing the relationship between inflation and unemployment.

coincident indicators

Statistical data that, on average, change at approximately the same time and in the same direction as the economy as a whole.

Consumer Price Index (CPI)

Price index which measures the cost of living by measuring the prices of a given basket of goods. Often used as an indicator of inflation.

microeconomics

The branch of economics that analyzes the market behaviour of individual consumers and firms, how prices are determined, and how prices determine the production, distribution, and use of goods and services.

participation rate

The share of the working-age population (15 and older) that is in the labour market, either working or looking for work.

equilibrium price

The price at which the quantity demanded equals the quantity supplied.

deflation

A sustained fall in prices where the consumer price index (CPI) is negative.

seasonal unemployment

Unemployment that results from a company or industry that only operates during specific seasons of the year.

Gross Domestic Product (GDP)

The value of all goods and services produced in a country in a year.

final good

A finished product; one that is purchased by the ultimate end user.

balance of payments

The detailed statement of a country’s economic transactions with the rest of the world over a given period.

macroeconomics

The branch of economics that focuses on the performance of the economy as a whole, looking at the broader picture and to the challenges facing society as a result of scarcity and choice.

natural unemployment rate

Also called the full employment unemployment rate. At this level of unemployment, the economy is thought to be operating at close to its full potential or capacity.

frictional unemployment

Unemployment that results from normal labour turnover, from people entering and leaving the workforce, and from the ongoing creation and destruction of jobs.

labour force

The sum of the population aged 15 years and over who are either employed or unemployed.

discouraged workers

Unemployed individuals that cannot find jobs and have not made specific efforts to find a job within the previous month.

disinflation

A decline in the rate at which prices rise – i.e., a decrease in the rate of inflation. Prices are still rising, but at a slower rate.

structural unemployment

Unemployment that results when workers are unable to find work or fill available jobs because they lack the necessary skills, do not live where the jobs are available, or decide not to work at the wage rate offered by the market.

fiscal policy

The policy pursued by the federal government to influence economic growth through the use of taxation and government spending.

Bank Rate

The minimum rate at which the Bank of Canada makes short-term advances to the chartered banks, other members of Payments Canada and investment dealers who trade in the money market.

national debt

The accumulation of total government borrowing over time; the sum of past deficits minus the sum of past surpluses.

Lynx system

A Payments Canada electronic system for the transfer of large dollar payments between participating financial institutions.

overnight repos

An open-market operation used by the Bank of Canada to relieve undesired upward pressure on overnight financing rates.

Payments Canada

This association operates a highly automated national clearing system for interbank payments. Members include chartered banks, trust and loan companies and some credit unions and caisses.

overnight reverse repos

An open-market operation by the Bank of Canada to offset undesired downward pressure on overnight financing costs.

overnight rate

The interest rate set in the overnight market.

budget surplus

Occurs when government revenue for the year exceeds expenditures.

budget deficit

Occurs when total spending by the government for the year is higher than revenue collected.

monetary policy

The policy designed to improve the performance of the economy by regulating credit.

fiscal agent

An investment dealer appointed by a company or government to advise it in financial matters and to manage the underwriting of its securities.

collateral trust bond

A bond secured by stocks or bonds of companies controlled by the issuing company, or other securities, which are deposited with a trustee.

face value

The value of a bond or debenture that appears on the face of the certificate, ordinarily the amount the issuer will pay at maturity.

instalment debenture

A bond or debenture issue in which a predetermined amount of principal matures each year.

real return bond

A bond where the coupon payments and principal repayment are adjusted for inflation to provide a fixed real coupon rate.

callable bond

A bond that may be redeemed upon due notice by the bond issuer.

strip bond

Usually high quality federal or provincial government bonds where some or all of the interest coupons have been detached and are sold separately.

discount

The amount by which a preferred stock or bond sells below its par value.

coupon rate

The rate of interest that appears on the certificate of a bond.

yield to maturity

The rate of return investors would receive if they purchased a bond today and held it to maturity.

treasury bill (T-bill)

Short-term government debt, issued at a discount to mature at par, in denominations ranging from $1,000 to $1,000,000.

convertible bond

A bond which may be exchanged by the owner for the common stock of the same company.

debenture

A certificate of indebtedness of a government or company backed only by the general credit of the issuer and unsecured by mortgage or lien on any specific asset.

foreign bond

A domestic issuer debt security, issued in another country, denominated in that foreign country’s currency.

bond

A debt instrument secured by a physical asset for which the issuer promises to pay the holder a specified amount of interest based on the coupon rate, for a specified length of time, and to repay the loan on its maturity.

sinking fund

A fund set up to retire most or all of a debt issue over a period of time.

premium

The amount by which a preferred stock or debt security may sell above its par value.

Eurobond

Bonds that are issued in a currency other than the currency of the country where the bond is issued.

foreign pay bond

A domestic issuer debt security issued domestically that pays interest and principal in a foreign currency.