The Canadian Marketplace (1-3)

Office of the Superintendent of Financial Institutions (OSFI)

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

bid price

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

Toronto Stock Exchange (TSX)

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

underwriting

The purchase for resale of a security issue by one or more investment dealers or underwriters. The formal agreements pertaining to such a transaction are called underwriting agreements.

option

A right to buy or sell specific securities or properties at a specified price within a specified time.

National Registration Database (NRD)

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

discount broker

Buys and sells securities for clients at a greater commission discount than full-service firms. Also known as self-directed brokers.

initial public offering

A new issue of securities offered to the public for investment for the very first time. Must adhere to strict government regulations as to how the investments are sold to the public.

investment dealer

A person or company that engages in the business of trading in securities in the capacity of an agent or principal and is a member of IIROC.

investment representative

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

pension fund

A pool of assets managed with the goal of supplying its beneficiaries with income during their retirement years.

liquidity

1. The ability of the market in a particular security to absorb a reasonable amount of buying or selling at reasonable price changes. 2. A corporation's current assets relative to its current liabilities; its cash position.

preferred share

A class of share capital that entitles the owners to a fixed 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.

Nodal Exchange

A derivatives exchange that provides contracts to participants in the North American energy markets.

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.

Securities and Exchange Commission (SEC)

A federal body established by the United States Congress, to protect investors in the U.S. In Canada there is no national regulatory authority; instead, securities legislation is provincially administered.

savings bank

A financial institution whose main role is to accept savings deposits and pay interest on those deposits. Usually set up by a government and is similar in function to a credit union. AKA Alberta Treasury Branches (ATB).

Canadian Securities Administrators (CSA)

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

open-end fund

A mutual fund.

broker

An investment dealer or a duly registered individual that is registered to trade in securities in the capacity of an agent or principal and is a member of a Self-Regulatory Organization.

principal

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

investment fund

A fund or company that sells units or shares and invests the proceeds in a portfolio of securities. There are two principal types: closed-end and openend or mutual fund. Shares in closedend investment companies are readily transferable in the open market and are bought and sold like other shares. Capitalization is fixed. Open-end funds sell their own new shares to investors, buy back their old shares, and are not listed. Open-end funds are so-called because their capitalization is not fixed; they normally issue more shares or units as people want them.

Canadian Investor Protection Fund (CIPF)

A fund that protects eligible customers in the event of the insolvency of an IIROC dealer member. It is sponsored solely by IIROC and funded by quarterly assessments on dealer members.

CanPX

A joint venture of several IIROC member firms and operates as an electronic trading system for fixed income securities providing investors with real-time bid and offer prices and hourly trade data.

over-the-counter market

A market for securities made up of securities dealers who may or may not be members of a recognized stock exchange. This is mainly a market conducted over the telephone. Also called the unlisted, inter-dealer or street market. NASDAQ is an example of this market.

dealer market/OTC market/unlisted 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.

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.

Investment Industry Association of Canada (IIAC)

A member-based professional association that represents the interests of market participants.

arbitration

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

ICE NGX Canada

A natural gas exchange, headquartered in Calgary, Alberta that provides electronic trading, central counterparty clearing and data services to the North American natural gas and electricity markets.

Montreal Exchange (Bourse de Montreal)

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 Stock Exchange and all futures products that previously traded on the Toronto Futures Exchange.

market maker

A trader employed by a securities firm who is authorized and required, by applicable self-regulatory organizations (SROs), to maintain reasonable liquidity in securities markets by making firm bids or offers for one or more designated securities.

derivative

A type of financial instrument whose value is based on the performance of an underlying financial asset, commodity, or other investment. These are available on interest rates, currency, stock indexes. For example, a call option on IBM is a ________ because the value of the call varies in relation to the performance of IBM stock.

unlisted market

AKA dealer market AKA OTC 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.

self-directed broker

Also known as discount brokers. Offers discounted transaction costs and do not provide investment advice to investors.

Canadian Unlisted Board (CUB)

An Internet web-based system for investment dealers to report completed trades in unlisted and unquoted equity securities in Ontario.

CBID Institutional

An electronic trading system for fixed-income securities operating in the institutional market.

CBID

An electronic trading system for fixed-income securities operating in the retail market.

NEO Exchange

An exchange that provides listing services and facilitates trading in securities listed on the NEO Exchange, TSX, and the TSX Venture Exchange.

TSX Alpha Exchange

An exchange that provides trading in securities listed on TSX and TSXV. Order price and volume information is publicly available. Alpha Exchange is wholly owned by TMX Group Inc.

Ombudsman for Banking Services and Investments (OBSI)

An independent organization that investigates customer complaints against financial services providers.

investment advisor

An individual licensed to transact in the full range of securities. They 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).

financial intermediary

An institution such as a bank, life insurance company, credit union or mutual fund which receives cash, which it invests, from suppliers of capital.

agent

An investment dealer operates as this 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 transactions.

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 financial securities. Offer investors the advantages of diversification 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).

robo-advisor

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

self-regulatory organization (SRO)

An organization recognized by the Securities Administrators as having powers to establish and enforce industry regulations to protect investors and to maintain fair, equitable, and ethical practices in the industry and ensure conformity with securities legislation. Includes the Investment Industry Regulatory Organization of Canada and, the Mutual Fund Dealers Association.

schedule I bank

Canadian-owned banks. The largest 6 banks in Canada out-distance the asset size of other Canadian-owned banks. Regulated by the Bank Act.

schedule III bank

Banks that are federally regulated foreign bank branches of foreign institutions that have been authorized under the Bank Act to do banking business in Canada.

schedule II bank

Banks that are incorporated and operate in Canada as federally regulated foreign bank subsidiaries. Regulated by the Bank Act.

retail firm

Investment dealers that serve only retail clients. Includes full-service firms and discount brokers. Full-service firms offer a wide variety of products and services for the retail investor. Discount brokers execute trades for retail clients at a reduced rate, but do not provide investment advice.

TSX Venture Exchange

Canada's public venture marketplace, the result of the merger of the Vancouver and Alberta stock exchanges in 1999.

fintech

Companies that take advantage of computer technology to provide more efficient financial products and services.

last price

The price at which the last trade on a stock occurred.

integrated firm

Investment dealer that offers products and services that cover all aspects of the industry, including full participation in both the institutional and the retail markets.

institutional firm

Investment dealer that serves institutional clients exclusively.

equity securities

Evidence of a share of ownership stake in the company that issued the security.

clearing

The process of confirming and matching security trade details.

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 financial assets invested in securities, a home and other fixed assets, plus cash.

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.

Canadian Securities Exchange (CSE)

Launched in 2003 as an alternative marketplace for trading equity securities and emerging companies.

consumer finance company

Makes direct cash loans to consumers, who usually are unable to secure a loan from a bank. They typically charge a higher interest rate than banks.

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 prior to effecting a trade for a client.

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 this type of market.

institutional investor

Organizations, such as pension and mutual fund companies, that trade in large-share quantities or dollar amounts. They typically have a steady flow of money to invest.

firewall

Policies implemented to separate and isolate persons within a firm who make investment decisions from persons within a firm who are privy to undisclosed material information which may influence those decisions. For example, there should be separate fax machines for research departments and sales departments.

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).

CDS Clearing and Depository Services Inc.

Provides customers with physical and electronic facilities to deposit and withdraw depository-eligible securities and manage their related ledger positions (securities accounts). Also provides electronic clearing services both domestically and internationally, allowing customers to report, confirm and settle securities trade transactions.

CanDeal

Provides institutional investors with electronic access to federal bond bid and offer prices and yields from its six bank-owned dealers.

MarketAxess

Provides market data and a trading platform with access to multi-dealer competitive pricing for a wider range of corporate bonds and other types of fixed-income instruments. Is a member of IIROC.

Mutual Fund Dealers Association Investor Protection Corporation (MFDA IPC)

Provides protection for eligible customers of insolvent MFDA member firms.

sales finance company

Purchases, at a discount, instalment sales contracts from retailers and dealers when such items as new cars and appliances are bought on instalment plans.

primary market distribution

The issuance of securities in the primary market.

gatekeeper

Refers to 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 that identify the gatekeeper function and formal reporting procedures.

common share

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

fixed-income securities

Securities that generate a predictable stream of interest or dividend income, such as bonds, debentures and preferred shares.

closed-end fund

Shares in these investment companies are readily transferable in the open market and are bought and sold like other shares. Capitalization is fixed. Typically issue shares only at start-up or at other infrequent periods.

ask price

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

debt security

Such as a bond or debenture. The instrument represents a liability on a loan and specifies basic terms such as the amount borrowed, the interest rate and maturity date.

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.

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 this market go to the selling dealers and investors, rather than to the companies that originally issued the shares in the primary market.

settlement

The moment of irrevocable exchange of cash and securities.

primary offering

The original sale of any issue of a company's securities.

money market

That part of the capital market in which short-term financial obligations are bought and sold. These include treasury bills and other federal government securities, and commercial paper, and bankers' acceptances and other instruments with one year or less left to maturity. Longer term securities, when their term shortens to the limits mentioned, are also traded in the money market.

National Do Not Call List (DNCL)

The Canadian Radio-television and Telecommunications Commission (CRTC) has established Rules that telemarketers and organizations that hire telemarketers must follow. It prohibits telemarketers and clients of telemarketers from calling telephone numbers that have been registered on this for more than 31 days.

Investment Industry Regulatory Organization of Canada (IIROC)

The Canadian investment industry's national self-regulatory organization. Carries out its regulatory responsibilities through setting and enforcing rules regarding the proficiency, business and financial conduct of dealer firms and their registered employees and through setting and enforcing market integrity rules regarding trading activity on Canadian equity marketplaces.

Mutual Fund Dealers Association (MFDA)

The Self-Regulatory Organization (SRO) that regulates the distribution (dealer) side of the mutual fund industry in Canada.

Autorite des marches financiers (AMF)

The body that administers the regulatory framework surrounding Québec's financial sector: securities sector, the distribution of financial products and services sector, the financial institutions sector and the compensation sector.

netting

The central clearing system uses this process to establish and confirm a credit or debit position balance, in the form of cash or security, for each dealer member. This process compiles each firm's clearing settlement sheets and informs each member of the securities or funds it must deliver to balance its account. In this way, the number of securities and the amount of cash that must change hands among the various members each day is substantially reduced.

bid-ask spread

The difference between the current bid and ask, calculated as Ask - Bid.

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.