C Flashcards
Call Feature
A clause in a bond or preferred share
agreement that allows the issuer the right to
“call back” the securities prior to maturity.
The company would usually do this if they
could refi nance the debt at a lower rate
(similar to refi nancing a mortgage at a lower
rate). Calling back a security prior to
maturity may involve the payment of a
penalty known as a call premium
Call Option
The right to buy a specific number of shares
at a specified price (the strike price) by a
fixed date. The buyer pays a premium to
the seller of the call option contract. An
investor would buy a call option if the
underlying stock’s price is expected to rise.
See also Put Option.
Call Price
The price at which a bond or preferred
share with a call feature is redeemed by the
issuer. This is the amount the holder of the
security would receive if the security was
redeemed prior to maturity. The call price is
equal to par (or a stated value for preferred
shares) plus any call premium. See also
Redemption Price.
Call Protection Period
For callable bonds, the period before the
first possible call date.
Callable
May be redeemed (called in) upon due
notice by the security’s issuer.
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
Canada Education Savings Grant
CESG
An incentive program for those investing in
a Registered Education Savings Plan
(RESP) whereby the federal government
will make a matching grant of a maximum
of $500 to $600 per year of the first $2,500
contributed each year to the RESP of a
child under age 18.
Canada Pension Plan (CPP)
A mandatory contributory pension plan designed to provide monthly retirement, disability and survivor benefits for all Canadians. Employers and employees make equal contributions. Québec has its own parallel pension plan Québec Pension Plan (QPP).
Canada Premium Bonds (CPBs)
A relatively new type of savings product
that offers a higher interest rate compared
to the Canada Savings Bond and is
redeemable once a year on the anniversary
of the issue date or during the 30 days
thereafter without penalty.
Canada Savings Bonds (CSBs)
A type of savings product that pays a
competitive rate of interest and that is
guaranteed for one or more years. They
may be cashed at any time and, after the
first three months, pay interest up to the
end of the month prior to being cashed.
Canada Yield Call
A callable bond with a call price based on
the greater of (a) par or (b) the price based
on the yield of an equivalent-term
Government of Canada bond plus a
specifi ed yield spread. Also known as a
Doomsday call. See also Call Price and
Callable Bond.
Canadian Derivatives Clearing
Corporation (CDCC)
The CDCC is a service organization that
clears, issues, settles, and guarantees options,
futures, and futures options traded on the
Bourse de Montréal (the Bourse).
Canadian Investor Protection Fund
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.
Canadian Life and Health
Insurance Association Inc.
(CLHIA)
The national trade group of the life
insurance industry, which is actively
involved in overseeing applications and
setting industry standards.
Canadian National Stock Exchange
CNSX
Launched in 2003 as an alternative
marketplace for trading equity securities
and emerging companies.
Canadian Originated Preferred
Securities (COPrS)
Introduced to the Canadian market in
March 1999, as long-term junior
subordinated debt instruments. This type of
security offers features that resemble both
long-term corporate bonds and preferred
shares.
Canadian Payments Association
CPA
Established in the 1980 revision of the
Bank Act, 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.
Canadian Securities
Administrators (CSA)
The CSA is 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.
Canadian Unlisted Board (CUB)
An Internet web-based system for investment
dealers to report completed trades in unlisted
and unquoted equity securities in Ontario.
CanDeal
Provides institutional investors with
electronic access to federal bond bid and
offer prices and yields from its six
bank-owned dealers.
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.
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.
Capital and Financial Account
Account which reflects the transactions
occurring between Canada and foreign
countries with respect to the acquisition of
assets, such as land or currency. Along with
the current account a component of the
balance of payments.
Capital Gain
Selling a security for more than its purchase
price. For non-registered securities, 50% of
the gain would be added to income and
taxed at the investor’s marginal rate.
Capital Loss
Selling a security for less than its purchase
price. Capital losses can only be applied
against capital gains. Surplus losses can be
carried forward indefinitely and used
against future capital gains. Only 50% of
the loss can be used to offset any taxable
capital loss.
Capital Market
Financial markets where debt and equity
securities trade. Capital markets include
organized exchanges as well as private
placement sources of debt and equity.
Capital Stock
All shares representing ownership of a
company, including preferred as well as
common. Also referred to as equity capital.
Capitalization or Capital Structure
Total dollar amount of all debt, preferred
and common stock, and retained earnings
of a company. Can also be expressed in
percentage terms
Capitalizing
Recording an expenditure initially as an
asset on the statement of financial
position rather than as an expense on the
statement of comprehensive income, and
then writing it off or amortizing it (as an
expense on the statement of
comprehensive income) over a period of
years. Examples include interest, and
research and development.
Carry Forward
The amount of RRSP contributions that
can be carried forward from previous years.
For example, if a client was entitled to place
$13,500 in an RRSP and only contributed
$10,000, the difference of $3,500 would be
the unused contribution room and can be
carried forward indefi nitely
Cash Account
A type of brokerage account where the
investor is expected to have either cash in
the account to cover their purchases or
where an investor will deliver the required
amount of cash before the settlement date
of the purchase.
Cash Flow
A company’s profit for a stated period plus
any deductions that are not paid out in
actual cash, such as depreciation. For an
investor, any source of income from an
investment including dividends, interest
income, rental income, etc.
Cash-Secured Put Write
Involves writing a put option and setting
aside an amount of cash equal to the strike
price. If the cash-secured put writer is
assigned, the cash is used to buy the stock
from the exercising put buyer.
Cash Value
The current market value of a segregated
fund contract, less any applicable deferred
sales charges or other withdrawal fees
CBID
An electronic trading system for fixed income securities operating in both retail and institutional markets.
