CSC-/Chapter 1/The Capital Market/Definitions

Prefferred Shares

A class of shares that entitle the owner to a fixed dividend ahead of the companies common shares, which do not have voting rights.

Investment Fund

A company that uses its capital to invest in another company.

Derivative

A financial instrument (Options, futures, rights) based on the performance of an underlying financial asset, commodity, or investment. They are available on interest rate, stock index, or currency.

*CanPX*

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

Stock Exchange

A marketplace where buyers and sellers meet to trade with each other and where prices are established according to supply and demand.

Bourse De Montreal

A stock exchange exclusively dealing with non- agricultural options that previously traded on the TSX and TSfuture exchange.

*Quotation and Trading Report System (QTRS)

A stock markets that operate like the exchange and provide facilities to users to post quotations and reporting trades. Ex. on Stockwach, CNSX

*Market Makers

A trader employed by a securities firm who is authorized and employed by SRO who are responsible of the liquidity in securities. They make firms bids or offers from their inventory.

Canadian National Stock Exchange (CNSX)

An alternative marketplace for trading equities securities and emerging companies.

ICE Future Canada (Winnepeg Stock Exchange)

An exchange that trades agriculture futures and options exclusively.

Indirect investment

An individual buys a security.

Investment Advisor (IA)

An individual licensed to transact in the full range of securities. IA's must be registered by the securities commission in the province in which he works, and are SRO member firms only. (Registered Representatives)

Direct investment

An individual or company invests directly in an item (e.g., house, new plant or new road).

Mutual Funds

An investment fund that manages investments for its clients using the proceeds from shares sold to investors to invest in stocks, bonds, and derivatives and other financial securities.

TSX Venture

Canadas public venture market, the result on the merger of the Vancouver and Alberta Stock exchange.

Alternative Trading System (ATS)

Privately owned computerized network that match orders for securities outside of recognized exchange facilities. Aka (PETS) Proprietary Electronic Trading System.

*CanDeal*

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

Auction Market

Securities are bought and sold by the broker (agent) for their client. Clients' bid and ask quotations for a stock in a single central market (stock exchanges) and compete against each other.

*Open Ended Investment Funds

Sell their own new shares to investors, buy back old shares and are not listed.

Individuals

Supply investment capital through savings and use capital to finance major purchases or for consumption.

Market Capital

The dollar value of a company based on the market price or its issued and outstanding common shares

Primary Market

The initial sale of securities, with proceeds of the sale going directly to the company issuing the security.

Equity (Stocks)

The investor buys shares(stake in the company).

Toronto Stock Exchange

The largest stock exchange in canada with over 1700 companies listed on the exchange.

Institutional Investor

The legal entity that represents the collective financial interest of a large group. A mutual fund, insurance company, pension fund, and corporate treasury.

*Options

The right to buy or sell specific securities or property at a specific price within a specific time. (Put options/Call options)

Secondary Market

The transfer of already issued securities among investors, traded over an exchange

Private Equity

The financing of firms unable/unwilling to find capital using public means (stock or bond markets). It trades publicly allowing the businesses to get financing when issuing equity in the public markets. Main investors are public/private pension plans, endowments, foundations, and wealthy individuals

*Close-Ended Investment Funds

Transfers in the open-market, and are bought and shared like other markets.

Businesses

Use capital to finance day-to-day operations, to renew and maintain plant and equipment, expand and diversify activities.

Governments

Use capital when expenditures exceed revenue and to finance large projects.

Deal Market (Unlisted Market)

Where securities are bought and sold OTC with dealers acting as principle when buying and selling securities for clients. Trades are directly negotiated with the market. Most bonds and debentures trade on these markets.

*CBID*

an electronic trading system for fixed income securities operating in both retail and institutional markets.

Investment Capital

available and investable wealth (e.g., real estate, stocks, bonds and money) that is used to enhance the economic growth prospects of an economy It is mobile, it is sensitive, and it is in short supply.

Common Shares

securities representing ownership within a market. They are entitled to ownership priviledges and dividends, if declared.

Financial Market

Facilitates the transfer of capital between investors and users through the exchange of securities.

Retail Investor

Individual investors who buy and sell securities for their own personal accounts, buying smaller quantities than institutional investors

Foreign Investors

Invest in Canada to access returns on investment not available in other countries and will use Canadian capital if they can borrow at a better rate than elsewhere

Debt (Bond or Debentures)

Money borrowed from lenders, with the borrowers pay interest. The term to maturity of a debt instrument can be either short (less than five years) or long (more than ten years).