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37 Cards in this Set
- Front
- Back
Alternative trading systems (ATSs)
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Alternative Trading Systems (ATS)
Privately-owned computerized networks that match orders for securities outside of recognized exchange facilities. Also referred to as Proprietary Electronic Trading Systems (PETS). |
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Approved Participants
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Participating Organizations
A fi rm entitled to trade through the Toronto Stock Exchange or TSX Venture Exchange. The equivalent term on the Bourse de Montréal is Approved Participant. |
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Auction market
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Auction Market
Market in which securities are bought and sold by brokers acting as agents for their clients, in contrast to a dealer market where trades are conducted over-the-counter. For example, the Toronto Stock Exchange is an auction market. |
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Budget
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Each year the Minister of Finance presents the government’s budget to Parliament. The budget
details the government’s estimate of its revenues and expenses, which in turn results in a projection of a budget surplus or budget deficit. |
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Canadian National Stock Exchange (CNSX)
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Canadian National Stock Exchange
(CNSX) Launched in 2003 as an alternative marketplace for trading equitsecurities and emerging companies. |
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CanDeal
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CanDeal
Provides institutional investors with electronic access to federal bond bid and offer prices and yields from its six bank-owned dealers. |
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Capital
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Capital
Has two distinct but related meanings. To an economist, it means machinery, factories and inventory required to produce other products. To an investor, it may mean the total of fi nancial assets invested in securities, a home and other fi xed assets, plus cash. |
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CBID
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CBID
An electronic trading system for fi xedincome securities operating in both retail and institutional markets. |
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Common shares
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Common Stock
Securities representing ownership in a company. They carry voting privileges and are entitled to the receipt of dividends, if declared. Also called common shares. |
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Dealer markets
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Dealer Market
A market in which securities are bought and sold over-the-counter in which dealers acts as principals when buying and selling securities for clients. Also referred to as the unlisted market. |
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Debt
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Debt
Money borrowed from lenders for a variety of purposes. The borrower typically paysinterest for the use of the money and is obligated to repay it at a set date. |
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Derivative
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Derivative
A type of fi nancial instrument whose value is based on the performance of an underlying fi nancial asset, commodity, or other investment. Derivatives are available on interest rates, currency, stock indexes. For example, a call option on IBM is a derivative because the value of the call varies in relation to the performance of IBM stock. See also Options. |
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Equity
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Equity
Ownership interest in a corporation’s stock that represents a claim on its earnings and assets. See also Stock. |
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ICE Futures Canada
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ICE Futures Canada (formerly the
Winnipeg Commodity Exchange) An exchange that trades agricultural futures and options exclusively. |
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Institutional Investors
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Institutional investors are organizations, such as a
pension fund or mutual fund company, that trade large volumes of securities and typically have a steady flow of money to invest. |
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Investment advisor
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Investment Advisor (IA)
An individual licensed to transact in the full range of securities. IAs must be registered in by the securities commission of the province in which he or she works. The term refers to employees of SRO member firms only. Also known as a Registrant or Registered Representative (RR). |
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Investment fund
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An investment fund is a company or trust that manages investments for its clients
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Market capitalization
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Market Capitalization
The dollar value of a company based on the market price of its issued and outstanding common shares. It is calculated by multiplying the number of outstanding shares by the current market price of a share. |
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Market makers
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Market Maker
A trader employed by a securities fi rm who is authorized and required, by applicable self-regulatory organizations (SROs), to maintain reasonable liquidity in securities markets by making fi rm bids or offers for one or more designated securities. |
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Mutual fund
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Mutual Fund
An investment fund operated by a company that uses the proceeds from shares and units sold to investors to invest in stocks, bonds, derivatives and other fi nancial securities. Mutual funds offer investors the advantages of diversifi cation and professional management and are sold on a load or no load basis. Mutual fund shares/units are redeemable on demand at the fund’s current net asset value per share (NAVPS). |
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Montreal Exchange (ME)
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Bourse de Montréal
A stock exchange (also referred to as the Montréal Exchange) that deals exclusively with non-agricultural options and futures in Canada, including all options that previously traded on the Toronto StockExchange and all futures products that previously traded on the Toronto Futures Exchange. |
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Open-end fund
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also known as a mutual fund. The fund raises capital by
selling shares or units to investors, and then invests that capital. As unitholders, the investors receive part of the money made from the fund’s investments. |
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Option
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Option
A right to buy or sell specifi c securities or properties at a specifi ed price within a specifi ed time. See Put Options and Call Options. |
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Personal disposable income
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Personal Disposable Income
The amount of personal income an individual has after taxes. The income that can be spent on necessities, nonessential goods and services, or that can be saved. |
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Preferred shares
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Preferred Shares
A class of share capital that entitles the owners to a fi xed dividend ahead of the company’s common shares and to a stated dollar value per share in the event of liquidation. Usually do not have voting rights unless a stated number of dividends have been omitted. Also referred to as preference shares. |
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Primary market
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Primary Market
The market for new issues of securities. The proceeds of the sale of securities in a primary market go directly to the company issuing the securities. See also Secondary Market. |
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Quotation and trade reporting systems (QTRS)
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Quotation and Trade Reporting
Systems (QTRS) Recognized stock markets that operate in a similar manner to exchanges and provide facilities to users to post quotations and report trades. |
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Retail Investor
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Retail Investor
Individual investors who buy and sell securities for their own personal accounts, and not for another company or organization. They generally buy in smaller quantities than larger institutional investors. |
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Secondary Market
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Secondary Market
The market where securities are traded through an exchange or over-the-counter subsequent to a primary offering. The proceeds from trades in a secondary market go to the selling dealers and investors, rather than to the companies that originally issued the shares in the primary market. |
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Stock exchange
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Stock Exchange
A marketplace where buyers and sellers of securities meet to trade with each other and where prices are established according to laws of supply and demand. |
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Toronto Stock Exchange (TSX)
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Toronto Stock Exchange (TSX)
The largest stock exchange in Canada with over 1,700 companies listed on the exchange. |
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TSX Venture Exchange
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TSX Venture Exchange
Canada’s public venture marketplace, the result of the merger of the Vancouver and Alberta Stock Exchanges in 1999. |
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1. Define investment capital and describe its role in the economy.
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• Investment capital is available and investable wealth (e.g., real estate, stocks, bonds and
money) that is used to enhance the economic growth prospects of an economy. • In direct investment, an individual or company invests directly in an item (e.g., house, new plant or new road); indirect investment occurs when an individual buys a security and the issuer invests the proceeds. • Capital has three characteristics: it is mobile, it is sensitive, and it is in short supply. |
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Describe how individuals, businesses, governments and foreign agencies supply and use
capital in the economy. |
2. Describe how individuals, businesses, governments and foreign agencies supply and use
capital in the economy. • Individuals generate investment capital through savings and use capital to fi nance major purchases or for consumption. • Retail investors are individuals who buy and sell securities for their personal accounts; institutional investors are companies and other organizations. • Businesses use capital to fi nance day-to-day operations, to renew and maintain plant and equipment, and to expand and diversify activities. • Governments use capital when expenditures exceed revenue and to fi nance large projects. • Foreign investors invest in Canada to access returns on investment not perceived to be available in other countries. Foreign investors will use Canadian capital if they can borrow at a more advantageous rate in Canada than elsewhere. |
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3. Differentiate between the types of fi nancial instruments used in capital transactions.
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• Debt (bonds or debentures): the issuer promises to repay a loan at maturity, and in the
interim makes payments of interest or interest and principal at predetermined times. The term to maturity of a debt instrument can be either short (less than fi ve years) or long (more than ten years). • Equity (stocks): the investor buys a share that represents a stake in the company. • Investment funds (mutual funds, segregated funds): a company or trust that manages investments for its clients. • Derivatives (options, futures, rights): products derived from an underlying instrument such as a stock, fi nancial instrument, commodity or index. • Other investment products (income trusts, exchange-traded funds): investments that are relatively new and do not fi t into any of the standard categories. |
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4. Explain the role of fi nancial markets in the Canadian fi nancial services industry, distinguish
among the types of fi nancial markets, and describe how auction markets and dealer markets work. |
The fi nancial markets facilitate the transfer of capital between investors and users
through the exchange of securities. • The exchanges do not deal in physical movement of securities; they are simply the venue for agreeing to transfer ownership. • The primary market is the initial sale of securities to an investor. • The secondary market is the transfer of already issued securities among investors. • Dealer markets are network of dealers that trade with each other directly on a negotiated market with market makers. Most bonds and debentures trade on these markets. • In an auction market, clients’ bids and offers for a stock are channelled to a single central market (stock exchanges) and compete |
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5. Explain what private equity is, how it has grown and the different ways of investing in this
market. |
Private equity is the fi nancing of fi rms unwilling or unable to fi nd capital using public
means – for example, via the stock or bond markets. • It complements publicly traded equity by allowing businesses to obtain fi nancing when issuing equity in the public markets may prove diffi cult or impossible. • The growth of private equity has been remarkable over the last 25 years. • Public and private pension plans, endowments, foundations, and wealthy individuals are the main investors in the private equity market. |