Chapter 2: The Capital Market

Question 1

3 elements of utmost importance to the industry

Answer 1

1) financial intermediaries
2) financial markets
3) financial instruments

Question 2

Direct Investment example

Answer 2

purchasing a house

Question 3

Indirect Investment example

Answer 3

purchasing a stock

Question 4

3 Characteristics of Capital

Answer 4

1) it is mobile
2) it is scarce
3) it is sensitive to its environment

Question 5

Middleman

Answer 5

financial intermediary

Question 6

Structure Product

Answer 6

a financially engineered investment product that can have the characteristics of bonds, equities, and investment funds.

Question 7

Bid

Answer 7

the highest price a buyer is willing to pay

Question 8

Ask

Answer 8

the lowest price a seller is willing to accept

Question 9

Spread

Answer 9

difference between the bid and ask price

Question 10

Liquid market is one where the following conditions exist:

Answer 10

• frequent sales
• small price spreads
• small price fluctuations from sale to sale

Question 11

TSX

Answer 11

lists senior equities, income trusts, ETFs and some debt instruments that are convertible into a listed equity.

Question 12

TSX Venture

Answer 12

trades junior equities and some debentures

Question 13

TSX Alpha Exchange

Answer 13

offers trading in some securities on the TSX and TSX Venture Exchange

Question 14

The Montreal Exchange/Bourse de Montreal

Answer 14

trades all financial and equity futures and options

Question 15

The Natural Gas Exchange

Answer 15

provides a trading mechanism for N.A. natural gas and electricity markets

Question 16

Canadian Securities Exchange

Answer 16

lists equities of emerging (newer) companies

Question 17

ICE Futures Exchange

Answer 17

trades agricultural futures and options

Question 18

Aequitas NEO Exchange

Answer 18

provides listing services and facilitates the trading of securities that are listed on the Aequitas NEO exchange, as well as the TSX and TSX Venture Exchange.

Question 19

The Nodal Exchange

Answer 19

a derivative exchange that provides contracts to N.A. energy market participants.

Question 20

Dealer Markets

Answer 20

consists of networks of dealers who trade with each other either through a computer network or over the telephone.

Question 21

Auction Markets

Answer 21

Stock exchange

Question 22

over the counter (OTC)

Answer 22

company is too small
low investor interest
low volume of trading in its shares
company doesn't want to be listed
company is unwilling to abide by exchange rules

Question 23

CanDeal

Answer 23

• member of the IIROC
• recognized as an ATS
• operated by the TMX group
• offers institutional investors access to government and money market securities.

Question 24

CBID

Answer 24

an ATS that operates two fixed-income marketplaces, retail and institutional

Question 25

MarketAxess

Answer 25

Member of IIROC in Quebec and Ontario
provides market data and a trading platform with access to competitive pricing through multiple dealers for a wide range of fixed income instruments.

Question 26

CanPX

Answer 26

a joint venture with several IIROC member firms.

provides investors with real-time bid and offer prices, with volume information on GoC bonds and T-bills.