Chapter 1 Flashcards
What are the 3 categories of securities firms in Canada?
Retail: full service or self-directed (discount) brokers
Institutional: pension funds, mutual funds
Integrated: underwrites government debt, corporate debt/equity issues
What are the roles of the offices of an investment dealer?
Front office: PM, trading, sales, marketing
Middle office: compliance, accounting, legal
Back office: settlement
What is a market maker?
A trader who is required to maintain reasonable liquidity in the market by making bids and offers for securities
Takes positions to enhance market liquidity and smooth price distortions
What role does CDS play in Canada?
CDS Clearing and Depository Services
Designated central clearing system handles daily settlement processes between members
CDSX facility for clearing equity and debt securities in Canada
What is the difference between principal and agent?
Principal: owns securities as part of commission, difference between buy and sell price is gross profit/loss
Agent: does not own securities, commission is per transaction, spread
What are the 3 types of chartered banks?
Schedule I Bank: domestic bank, big 6
Schedule II Bank: incorporated and operates in Canada as a federally-regulated foreign bank subsidiary
Mostly retail and electronic services
Schedule III Bank: Foreign bank branches authorized under Bank Act to do business in Canada
Corporate and institutional finance
Which type of bank has strict ownership rules?
Schedule I Bank:
Large bank - up to 20%
Medium bank - up to 65%
Small bank - up to 100%
What is a credit union?
Credit unions often cater to member-savers from common interest groups
Governing federal legislation is Cooperative Credit Associations Act (CCAA)
Follows rules based on ‘prudent portfolio approach’
What role do insurance companies play in the financial market?
Life insurance & Property/Casualty insurance
Largest insurance: automobile
Underwriting is the most important aspect of insurance
Reinsurance is second most important
What is a trust company?
Trust company act as a trustee in charge of corporate and individual assets
What is the purpose of an investment fund?
Sell shares to public and invest proceeds in a diverse securities portfolio
Closed-ended: issue shares only at start
Open-ended: continuous shares (mutual fund)
What are the 2 Government-related pension plans in Canada?
DBP Defined Benefit Plan: provides pre-determined payments
DCP Defined Contribution Plan: allows employees to contribute over time
What is a robo-advisor?
What is fintech?
Robo: Online investment service, provides clients with advice
Fintech: Use computer technology to support online banking
