Chapter 7: Trading, Settlement, and Prohibited Activities Flashcards
The three components of a trade:
- The standard trading unit
- The settlement Period
- The minimum quotation spread
The quantity of a security that makes up a standard trading unit is defined in the _________ ________ __________ __________.
Universal Market Integrity Rules (UMIR)
Orders (or portions of orders) to buy or sell that are not in multiples of standard trading units are considered to be ____ _____.
odd lots
What are the standard trading units and odd lots of a security that is less than $0.10 per unit?
Standard Trading Unit = 1,000
Odd Lot = 1 to 999
What are the standard trading units and odd lots of a security that is between $0.10 and $1.00?
Standard Trading Unit = 500
Odd lot= 1 to 499
What are the standard trading units and odd lots of a security that is more than $1.00?
Standard Trading Unit = 100
Odd Lot= 1 to 99
The process of transferring securities into the account of a buyer and cash into the seller’s account following a trade of stocks, bonds, futures, or other financial assets is known as ______ ________.
trade settlement
The _________ _________ is the time between the date of a securities transaction and the date on which ownership of the security is transferred
settlement period
What is the settlement period for Gov’t of Canada T-Bills?
T+0 (Same Day Settlement)
What is the settlement period for Gov’t of Canada Bonds?
T+2 (Trade date plus two business days)
What is the settlement period for Preferred and common shares?
T+2 (Trade date plus two business days)
When clients sell a security at the market, they receive the _____ ______, which is the highest price any buyer is willing to pay.
bid price,
When they buy a security at the market, they pay the ____ _____ (sometimes called the _____ _____), which is the lowest price at which any seller is willing to sell
Ask Price
Offer Price
The minimum acceptable range between bid and ask prices when quotations are given for securities.
The minimum quotation spread
For a security over $0.50, the minimum quotation spread is at least _____
$0.01 (EX: $2.34 (bid) and $2.35 (ask)
For each purchase and sale instruction received from a client, you must complete an _____ _______ in accordance with the rules enforced by provincial authorities, the exchanges, and IIROC
order ticket
The order ticket must include the following details
- The client’s name or the account number (or both)
- The quantity and description of the security (most often shown by a symbol)
- A notation as to the price (e.g., limit, market, or on-stop)
- A notation as to whether the order is professional (PRO), non-client (N–C), or employee (EMP)
- A notation as to whether the order is a short sale or discretionary order
It is essential that you _______ each order back to the client
repeat
Generally speaking, order types are categorized by the following characteristics:
Duration - How long is the order valid for?
Price Restrictions- Have any limits been set on the price?
Special Instructions- Are there any special instructions attached to the order?
Other- Are there any changes to the original order or is the client a PRO?
A GTC order on the TSX expires after ____ days
90
Special terms orders are executed on a ______ _______ _______.
Best Efforts Basis
What is a FOK order?
A fill or kill order is an order in which as much as possible must be filled immediately, after which the balance of the order is cancelled.
What is a Contingent order?
It is an order that takes second place to a primary order. (EX: Buy 1,000 shares of XYZ at market and Sell 10 calls at the current offer price.)
A ________ _______ _______ is a special term order in which the buying and selling parties agree that
delivery of the securities will be delayed beyond the
usual three-day settlement period to a date specified
in the order
delayed delivery order
The Standard Trading Unit for GOC T-Bills and other GOC direct and guarantees maturing in less than one year.
$250,000
Standard trading units of GOC direct and guarantees with terms of one to three years
$100,000
Standard trading units of GOC direct and guarantees with terms of over three years
$100,000
Standard trading units of Provincial bonds and guarantees
$25,000
Standard trading units of corporate and municipal bonds.
$25,000
Orders for the accounts of partners, directors, officers, RRs, and employees of a dealer member are generally considered PRO, EMP, or N-C orders, and will rank behind any client order of the same dealer member for the same security, at the same time, at the same price. This is known as the:
Client Priority Rule
Registrants, including RRs and Investment Representatives (IRs), have a ___________ ______ in that they must not, through act or omission, facilitate breaches of securities laws or regulations by clients
gatekeeper role
A client who wishes to place a buy order instructs the RR to contact a particular person at another dealer
member to take the other side of the trade. This is known as a _____ ______
Wash Trade
RRs must also be aware that under current anti-money laundering and anti-terrorist financing (AML/ATF)
regulations, suspicious transactions must be reported to:
Financial Transactions and Reporting Analysis
Centre of Canada (FINTRAC).
Failure to report suspicious transactions is an offence punishable by
up to five years’ imprisonment, a maximum fine of $2 million, or both
FINTRAC has legislative authority to issue an administrative monetary penalty (AMP) of up to _________ to reporting entities that are in noncompliance with Canada’s (PCMLTFA).
$500,000
When a dealer member determines that there are reasonable grounds to suspect that a transaction or attempted transaction is related to the commission of a money laundering offence, it is required to send a suspicious transaction report to FINTRAC within ______ days.
30
Failure to report a suspicious transaction through willful blindness is punishable by a fine of up to
______ and imprisonment for up to _______ years
$2 million and imprisonment for up to five years
Trading ahead of, and to the disadvantage of, a client order is known as ________, which is a serious offence
frontrunning
Trading in the marketplace based on material non-public information about the affairs of the underlying company constitutes ______ ________, and is prohibited by law
insider trading
The act of carrying out multiple transactions in a client’s account solely to increase the RR’s remuneration
Churning
RRs cannot display _________ certificates at their business location; however, the display of course completion certificates is permitted.
registration
For the purposes of the reporting provisions of the Acts, insiders are defined to include the following people:
• The directors and senior officers of the issuer.
• Any person or company (excluding underwriters in the course of public distribution) that beneficially owns, controls, or directs more than 10% of the voting rights attached to all voting securities.
• Any director or senior officer of a company that is a subsidiary of the issuer or is itself an insider due to
ownership, control, or direction over more than 10% of the voting rights attached to all voting securities of the issuer involved.
The maximum penalties for insider trading under the Securities Act (Ontario) include a fine of __________ and imprisonment for __________________.
$5 million
5 years less 1 day
(OSC) also has the power to order the payment of an administrative penalty of up to ________and to order
the disgorgement of monies obtained as a result of noncompliance if a person or company fails to comply with Ontario’s insider trading laws.
$1 million
The Criminal Code deals with the most serious cases that merit stiffer criminal penalties. The offences can carry prison terms of up to _______ for illegal insider trading and __________ for tipping
10 years
5 years
__________ are information barriers that separate persons who make investment decisions from persons who are privy to undisclosed material information that may influence those decisions
Firewalls
In Ontario, insider reporting requirements remain in the Securities Act (Ontario) and include a _____ day requirement for filing initial insider reports and a ______ day requirement for subsequent insider reports
10 day
5 day
A SEDI issuer is any reporting issuer, other than a mutual fund, that files disclosure documents electronically through the:
System for Electronic Document Analysis and Retrieval (SEDAR).
With this system, insiders can file their reports 24 hours a day, seven days a week and are not required to pay filing fees.
SEDI
Reporting issuers are also required to file issuer event reports on SEDI within _____ _________ ____of events, such as:
One business day
mergers, amalgamations, stock splits, and consolidations.
The seller _______ all accrued interest on bonds and debentures to the date the bonds or debentures are sold, unless otherwise arranged at the time of the transaction
retains
With this type of transfer, the beneficial owner or registered shareholder is an entity such as a corporation, partnership, or investment club
Transfer Involving Legal Documentation
Securities not delivered by the settlement date are called _______.
Fails
