CSC Chapter 1 - Canadian Securities Industry

Agent

When a broker acts as a _________, it acts for or on behalf of a buyer or a seller, but does not itself own title to the securities at any time during the transaction

Capital Markets

Markets that trade debt (bonds) and equity (stock) instruments with maturities of more than one year

Self-regulatory organizations

Responsible for setting the rules that govern many aspects of investment dealers' operations, including sales, finance, and trading.

Investment dealers

Act as intermediaries by matching investors with the users of capital. Each side of a transaction has its own dealer who matches the trades through the markets

Clearing

The process of confirming and matching security trade details

Settlement

The irrevocable moment when cash and securities are exchanged.

Financial Intermediary

Describes any organization that facilitates the trading or movement of financial instruments that transfer capital between suppliers and users of capital

Retail Firms

Include full-service investment dealers and self-directed brokers (also known as discount brokers)

Institutional Firms

Investment dealers that serve exclusively institutional clients, organizations that trade large volumes of securities. Institutional clients include pension funds and mutual funds

Integrated Firms

Offer products and services across the industry and participate fully in both the retail and institutional markets

Underwriting

An arrangement under which an investment banker agrees to purchase all shares of a public offering at an agreed-upon price. To assume the risk of something

Market Makers

Securities dealers that make a commitment to continuously offer to buy and sell the stock of a specific corporation listed on the NASDAQ exchange or traded in the OTC market

Schedule I banks

Banks that are not a subsidiary of a foreign bank and are considered domestic banks even if they have foreign shareholders

Schedule II banks

Incorporated and operate in Canada as federally-regulated foreign bank subsidiaries

Schedule III banks

Federally-regulated foreign bank branches of foreign institutions that have been authorized under the Bank Act to do banking business in Canada

Netting

Process compiles each firm's clearing settlement sheets and informs each member of the securities or funds it must deliver to balance its account. The number of securities and the amount of cash that must change hands among the various members each day is substantially reduced.

Spread

The ______________ between the two sets of interest rates covers the banks operating costs (rent, salaries, administration, appropriations for loan losses, etc.), as well as providing a margin for the banks' profits.

Self-directed brokers

Execute trades for clients at reduced rates but do not provide advice. _________ are more popular with those investors who are willing to research individual companies themselves in exchange for lower commission rates

Front Office

Performs all staff functions pertaining directly to portfolio management activities: Portfolio management, trading, sales and marketing

Middle Office

Performs functions critical to the efficient operation of the firm: Compliance, accounting, legal and audit

Principal