Chapter 1 Flashcards
Financial Intermediaries
Financial intermediary is an institution such as bank that borrows money from suppliers of capital and lend it to users of capital
CIRO
Candian Investment Regulatory Organization CSIRO is the National self-regulatory organization (SRO) that overseas all investment dealers,mutual fund dealers, and trading activity on Canada’s debt, equity, and mutual fund market prices. CIRO establishes and enforces industry regulations that protect investors and maintain fair and Equitable and ethical practices
Investment dealers
Investment dealers act as an intermediaries by matching investors with the users of capital
Clearing and Settlement
Clearing is the process of confirming and matching security details
Settlement is the irrevocable moment when cash and securities are exchanged
SRO
SRO sets and enforces rules that govern market activity and monitor the markets to ensure fairness and transparency
Investment Dealer
A company that acts as an intermediary by matching investors with the users of capital.
Principal
The person for whom a broker executes an order, or a dealer buying or selling for its own account. May also refer to a person’s capital or to the face amount of a bond.
Agent
The role of an investment dealer 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 transaction.
Clearing
The process of confirming and matching security trade details.
Mutual Fund
Investment fund using proceeds from shares and units sold to investors to invest in financial securities, redeemable on demand from the fund at the current net asset value per share.
Schedule III
A type of bank that is federally regulated and is a foreign bank branch of a foreign institution.
Firewall
Policies intended to separate and isolate investment decision-making persons in a firm from others in the firm who have undisclosed material information that could influence those decisions.
discount broker or self-directed broker
Brokerage house that buys and sells securities for clients at a greater commission discount than full-service firms.
Integrated Firm
A type of firm that offers products and services across the financial industry and participates fully in both the retail and institutional markets.
Closed End Fund
Shares in this investment fund type are readily transferable in the open market and are bought and sold like other shares. Capitalization is fixed.
Schedule I
Type of bank that is Canadian-owned and regulated by the Bank Act.
Schedule II
Type of bank that is incorporated and operates in Canada as a federally regulated foreign bank subsidiary.
Sales Finance Company
A type of financial intermediary that purchases instalment sales contracts from retailers and dealers at a discount.
CDS Clearing and Depository Services Inc.
Provides electronic clearing services; physical and electronic facilities to deposit and withdraw depository-eligible securities; management of related ledger positions.
Spread
A major activity of the banks is to loan funds to businesses and consumers at interest rates higher than those which they must pay in interest on deposits and other borrowings. The spread between the two sets of interest rates covers the banks operating costs (rent, salaries, administration, appropriations for loan losses, etc.), as well as providing a margin for the banks’ profits.
Sales Finance Company
Sales finance companies purchase, at a discount, instalment sales contracts from retailers and dealers when such items as new automobiles, appliances or home improvements are bought on instalment plans.
Identify the process by which the number of securities and the amount of cash that has to change hands among the various exchange members each day is substantially reduced.
A. Balancing.
B. Clearing.
C. Netting.
D. Settling.
The number of securities and the amount of cash that has to change hands among the various members each day is substantially reduced through a process called netting where the clearing system establishes and confirms a credit or debit cash or security position balance for each member firm, compiles their clearing settlement sheets and informs each member of the securities or funds it must deliver to balance its account. Clearing refers to the process of confirming and matching security trade details. Settlement refers to the moment of irrevocable exchange of cash and securities. Balancing simply refers to balancing a firm’s account, where they receive what they are owed and pay what they owe.
ABC Securities offers a wide range of products and services to both retail and institutional clients, as well as underwriting bond and equity issues. Determine the category of firm ABC belongs to.
A. Boutique.
B. Institutional.
C. Integrated.
D. Self-directed.
XYZ Investments, an investment dealer, regularly takes positions in DEF Inc, a TSX listed equity, with a goal of improving liquidity in DEF while smoothing out unwarranted price fluctuations. Identify the role XYZ likely plays in the stock market.
A. Agent.
B. Market maker.
C. Principal.
D. Underwriter.
Investment dealers can act as market makers and carry out market making duties by taking positions in assigned listed stocks to enhance market liquidity and smooth out undue price distortions.
