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Canadian Securities Course (CSC) > Volume 1- Chapter 2 > Flashcards

Volume 1- Chapter 2 Flashcards

1
Q

Identify a characteristic of capital.

A

Mobility.

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2
Q

Identify the transaction that takes place in the secondary market.

A

Resale of previously issued securities.

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3
Q

Identify a difference between auction and dealer markets.

A

Prices are publicly visible in the auction market but not in the dealer market.

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4
Q

Select the exchange in Canada that deals exclusively with financial futures and options.

A

The Montréal Exchange.

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5
Q

Choose the system that the Ontario Securities commission requires firms to use to report unlisted trades in Ontario.

A

Canadian Unlisted Board.

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6
Q

Identify the role that the Canadian Securities Exchange (CSE) plays in the Canadian marketplace.

A

Market for emerging companies.

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7
Q

Identify the security that has its value based on an underlying instrument.

A

Derivatives.

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8
Q

Select the electronic fixed-income trading system that operates a retail and an institutional fixed-income marketplace.

A

CBID/CBID Institutional.

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9
Q

Gareth asks his Investment Advisor to purchase $50,000 in new corporate bonds that are being issued to raise funds to build a new processing facility. Select the term that would refer to this type of capital investment.

A

Indirect investment.

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10
Q

Identify a characteristic of dealer markets.

A

Primary market for bonds and debentures.

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11
Q

The current bid price for ABC Inc is $25.75 and the ask price is $25.87, with last trade at $25.77. Calculate the spread.

A

0.12

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12
Q

Identify a characteristic of a liquid market.

A

Narrow price spreads in bid/ask prices.

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13
Q

XYZ is a producer of technologically advanced experimental electronic devices that has recently experienced rapid growth. Projections are that growth will continue but the market is uncertain at present. Determine the exchange XYZ’s investment dealer could recommend for listing of XYZ’s initial public offering.

A

Canadian Securities Exchange (CSE).

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14
Q

Identify the alternative trading system where an investment dealer can locate real time bid and offer quotations from a range of dealers for Government of Canada bonds and treasury bills.

A

CanPx.

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15
Q
A
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16
Q

What is capital synonymous with in the economy?

A

Wealth, both real (land, buildings) and representational (money, stocks, bonds)

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17
Q

What are examples of direct investment?

A
  • A couple invests their savings in a home
  • A government invests in a new highway
  • A company pays start-up costs for a new plant
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18
Q

What is indirect investment?

A

Occurs when an individual or entity buys securities issued by a government or corporation, which then invests the funds directly

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19
Q

What are the three important characteristics of capital?

A
  • Mobility
  • Sensitivity to its environment
  • Scarcity
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20
Q

What factors should be considered in evaluating country risk?

A
  • The political environment
  • Economic trends
  • Fiscal policy
  • Monetary policy
  • Investment opportunities
  • The labour force
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21
Q

True or False: Capital is abundant and readily available everywhere.

A

False

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22
Q

What is the primary source of capital?

A

Savings in various forms

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23
Q

Who are the main suppliers of capital?

A
  • Individuals
  • Non-financial domestic corporations
  • Governments
  • Foreign investors
24
Q

What do individuals typically need capital for?

A

To finance large purchases such as houses, cars, and major appliances

25
How do businesses generally obtain capital?
* Internally, through retained profits * Borrowing from financial intermediaries * Raising funds in securities markets
26
What are financial instruments?
Formal, legal documents that set out the rights and obligations of buyers and sellers of securities
27
What are fixed-income securities?
Instruments where the issuer promises to repay the loan at maturity and makes interest payments
28
Give examples of equity securities.
* Common stock * Preferred shares
29
What is a derivative?
A product whose value is derived from the value of an underlying instrument, such as a stock or an index
30
What are managed products?
Pools of capital gathered from investors to buy securities according to a specific investment mandate
31
What is the capital market composed of?
* Stock markets * Bond markets * Money markets
32
What is the difference between primary and secondary markets?
* Primary markets: Newly issued securities are sold directly to investors * Secondary markets: Investors trade already issued securities among themselves
33
What is an auction market?
A market where securities are bought and sold by investors through investment dealers acting as agents
34
What is the bid-ask spread?
The difference between the bid price and the ask price
35
What characterizes a liquid market?
* Frequent trades * Narrow price spread between bid and ask prices * Small price fluctuations from trade to trade
36
Name some exchanges that operate in Canada.
* Toronto Stock Exchange (TSX) * TSX Venture Exchange * TSX Alpha Exchange * Montréal Exchange
37
Fill in the blank: In the primary market, newly issued securities are sold by ______ to investors.
[companies and governments]
38
What are the two main categories of financial markets?
* Primary markets * Secondary markets
39
What does the Toronto Stock Exchange (TSX) list?
Equities, some debt instruments convertible into listed equity, income trusts, and exchange-traded funds ## Footnote The TSX is one of the primary exchanges in Canada.
40
What is the main focus of the TSX Venture Exchange?
Listing of equities and a few debenture issues ## Footnote It primarily caters to smaller, emerging companies.
41
What services does ICE NGX Canada provide?
Electronic trading, central counterparty clearing, and data services to the North American natural gas and electricity markets ## Footnote ICE NGX stands for Intercontinental Exchange Natural Gas Exchange.
42
What type of companies does the Canadian Securities Exchange list?
Equities of emerging companies ## Footnote This exchange is tailored for smaller, growing firms.
43
What is the role of Cboe Canada?
Provides listing services and facilitates trading in public companies, exchange-traded funds, Canadian Depositary Receipts™, special purpose acquisition companies, and closed-end funds ## Footnote Approximately 15% of all volume traded in Canadian-listed securities occurs through Cboe Canada.
44
What is TMX Group Limited?
An amalgamation of TSX Group companies that include the TSX, TSX Venture Exchange, TSX Alpha Exchange, and the Montreal Exchange ## Footnote It creates an integrated, multi-asset class exchange group.
45
What characterizes dealer markets?
A negotiated market where market makers post bid-and-ask quotations via electronic platforms and computer networks ## Footnote Unlike auction markets, dealer markets do not centralize orders.
46
How do bonds and debentures typically trade?
Almost all are sold through dealer markets ## Footnote This contrasts with equities, which are often traded in auction markets.
47
True or False: The volume of trading for debt securities is smaller than that of the equity market.
False ## Footnote The volume of trading in dollars for debt securities is significantly larger than that of the equity market.
48
What is the unlisted equity market?
A market where securities are not listed on an organized exchange and trade through dealer markets ## Footnote This market does not set minimum listing requirements.
49
Fill in the blank: In the unlisted equity market, the volume of unlisted equity business is much _______ than the volume of stock exchange transactions.
smaller
50
What is required for trades of unlisted securities in Ontario?
They must be reported through the web-based system of the Canadian Unlisted Board Inc. ## Footnote This requirement is specific to Ontario according to its Securities Act.
51
What are alternative trading systems (ATS)?
Electronic marketplaces that provide automated matching and execution of trades in equity and fixed-income markets ## Footnote ATSs offer competition to traditional exchanges.
52
What is a key difference between ATSs and traditional exchanges?
ATSs cannot list securities themselves ## Footnote They can trade securities listed on traditional exchanges.
53
What is CanDeal?
A fixed-income electronic trading system operated by the TMX Group Limited, offering access to government securities and money market instruments ## Footnote It is recognized as both a debt ATS and an investment dealer.
54
What type of marketplaces does CBID operate?
Two distinct fixed-income marketplaces: retail and institutional ## Footnote The retail marketplace is accessible by registered dealers on behalf of retail clients.
55
What does MarketAxess provide?
Market data and a trading platform with access to multi-dealer competitive pricing for corporate bonds and other fixed-income instruments ## Footnote It operates in Ontario and Quebec.
56
What is CanPX?
A system that combines digital feeds from participating dealers to provide a composite display of real-time bid and offer quotations ## Footnote It covers Government of Canada bonds and Treasury bills.

Canadian Securities Course (CSC) (12 decks)

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