Podcast
Questions and Answers
Which entities are allowed access to the institutional fixed-income marketplace?
Which entities are allowed access to the institutional fixed-income marketplace?
- Mutual funds and private equity firms
- Private investors and retailers
- Stock exchanges and commodity traders
- Registered dealers and pension funds (correct)
What does MarketAxess primarily provide?
What does MarketAxess primarily provide?
- Market data and a trading platform (correct)
- Insurance brokerage services
- Real estate advisory services
- Personal investment accounts
What is the role of CanPX in the fixed-income market?
What is the role of CanPX in the fixed-income market?
- To manage government bond auctions
- To regulate investment dealer practices
- To provide financial services to private investors
- To facilitate trades between investment dealers (correct)
Which of the following characteristics does capital NOT possess?
Which of the following characteristics does capital NOT possess?
What type of financial instrument represents the issuers’ debt, which investors purchase?
What type of financial instrument represents the issuers’ debt, which investors purchase?
What are governments primarily using capital to finance?
What are governments primarily using capital to finance?
Which department within an investment dealer is primarily responsible for portfolio management activities?
Which department within an investment dealer is primarily responsible for portfolio management activities?
What role does the middle office NOT fulfill in an investment dealer?
What role does the middle office NOT fulfill in an investment dealer?
The retail sales force in an investment dealer primarily serves which of the following?
The retail sales force in an investment dealer primarily serves which of the following?
When investment dealers act as principals, what is a characteristic of this role?
When investment dealers act as principals, what is a characteristic of this role?
Which of the following best describes the primary focus of the back office in an investment dealer?
Which of the following best describes the primary focus of the back office in an investment dealer?
What aspect of an investment dealer's operations is NOT typically associated with the sales department?
What aspect of an investment dealer's operations is NOT typically associated with the sales department?
What is one of the main reasons for the success of an investment dealer?
What is one of the main reasons for the success of an investment dealer?
Which function is NOT a responsibility of the middle office within the context of an investment dealer?
Which function is NOT a responsibility of the middle office within the context of an investment dealer?
What distinguishes principal transactions in an investment dealer's operations?
What distinguishes principal transactions in an investment dealer's operations?
Which statement is false regarding the functions of the back office?
Which statement is false regarding the functions of the back office?
What is the primary function of the SRO within the Canadian securities industry?
What is the primary function of the SRO within the Canadian securities industry?
Which organization provides insurance against the insolvency of investment dealers and mutual fund dealers?
Which organization provides insurance against the insolvency of investment dealers and mutual fund dealers?
What characterizes the settlement process in securities transactions?
What characterizes the settlement process in securities transactions?
What term best describes organizations that facilitate the movement of capital between suppliers and users?
What term best describes organizations that facilitate the movement of capital between suppliers and users?
What is the role of the Investment Industry Association of Canada (IIAC)?
What is the role of the Investment Industry Association of Canada (IIAC)?
Which regulatory body oversees the relationship between the SRO and the markets?
Which regulatory body oversees the relationship between the SRO and the markets?
In what way does the Canadian Securities Institute contribute to the securities industry?
In what way does the Canadian Securities Institute contribute to the securities industry?
Which of the following is a key function of clearing organizations in securities transactions?
Which of the following is a key function of clearing organizations in securities transactions?
What is the main characteristic of securities traded in the money market?
What is the main characteristic of securities traded in the money market?
What is a principal transaction in the context of investment dealers?
What is a principal transaction in the context of investment dealers?
What is the key difference between primary and secondary markets?
What is the key difference between primary and secondary markets?
What defines the bid-ask spread in stock trading?
What defines the bid-ask spread in stock trading?
In an auction market, how are trades executed?
In an auction market, how are trades executed?
Who primarily benefits from a transaction in the secondary market?
Who primarily benefits from a transaction in the secondary market?
What does the last price refer to in stock trading?
What does the last price refer to in stock trading?
Which market is characterized by agents executing orders on behalf of clients?
Which market is characterized by agents executing orders on behalf of clients?
What is the role of initial public offerings (IPOs)?
What is the role of initial public offerings (IPOs)?
What typically happens to the company's capital when securities are traded in the secondary market?
What typically happens to the company's capital when securities are traded in the secondary market?
What typically signifies a liquidity benefit in auction markets?
What typically signifies a liquidity benefit in auction markets?
What key service does ICE NGX Canada provide in relation to the natural gas and electricity markets?
What key service does ICE NGX Canada provide in relation to the natural gas and electricity markets?
What percentage of volume traded in Canadian-listed securities is through Cboe Canada?
What percentage of volume traded in Canadian-listed securities is through Cboe Canada?
Which of the following is NOT included in the services provided by TMX Group Limited?
Which of the following is NOT included in the services provided by TMX Group Limited?
What distinguishes dealer markets from auction markets?
What distinguishes dealer markets from auction markets?
What is a primary characteristic of the OTC market in relation to investment dealers?
What is a primary characteristic of the OTC market in relation to investment dealers?
Which statement accurately represents the visibility of dealer markets compared to auction markets?
Which statement accurately represents the visibility of dealer markets compared to auction markets?
What do nearly all bonds and debentures utilize for their transactions?
What do nearly all bonds and debentures utilize for their transactions?
Which of the following best describes the volume of debt securities trading relative to equities in the market?
Which of the following best describes the volume of debt securities trading relative to equities in the market?
What is true about unlisted equity markets compared to the stock exchange?
What is true about unlisted equity markets compared to the stock exchange?
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Study Notes
Clearing and Settlement Process
- Trades are cleared and settled through organizations like CDS Clearing and banks.
- Clearing confirms and matches trade details; settlement is the irreversible exchange of cash and securities.
Regulatory Bodies
- Self-Regulatory Organizations (SRO) enforce market activity rules and ensure fairness and transparency.
- Canadian Investor Protection Fund provides insurance against investment dealer and mutual fund dealer insolvency.
- Provincial regulators supervise SRO and market activities.
Investment Industry Associations
- Investment Industry Association of Canada (IIAC) represents various investment firms, including dealers and portfolio managers.
Role of Investment Dealers
- Investment dealers act as financial intermediaries, facilitating capital movement between suppliers and users.
- They are essential in the financial system, including banks, trust companies, and insurance companies.
Organizational Structure of Investment Dealers
- Front Office: Engages in portfolio management, trading, sales, and marketing.
- Middle Office: Handles compliance, accounting, audits, and legal functions.
- Back Office: Focuses on settling security transactions.
Principal vs. Agency Transactions
- Investment dealers can act as principals (owning securities) or agents (acting on clients' behalf).
- Principal Transactions involve owning securities and generating profit through the difference in buy/sell prices.
Market Types
- Primary Market: Newly issued securities sold directly to investors, such as through IPOs.
- Secondary Market: Trading of already issued securities among investors, where the issuing company does not receive proceeds.
Auction and Dealer Markets
- Auction Markets: Securities bought/sold by investors with orders executed when bids and offers match; characterized by bid-ask spreads.
- Dealer Markets: A network of dealers that trade securities via negotiated transactions, typically for bonds and debentures, and operate less visibly than auction markets.
Trading Platforms and Accessibility
- ICE NGX Canada provides electronic trading and clearing in natural gas/electricity markets.
- Cboe Canada lists public company equities and facilitates trading, accounting for approximately 15% of Canadian securities volume.
- TMX Group encompasses multiple exchanges for trading and market data across various asset classes.
Market Operations
- In dealer markets, investment dealers act as principals, executing trades through electronic platforms without a centralized marketplace.
- CanPX combines digital feeds from dealers to display real-time bid and offer quotations for government bonds.
Summary of Capital Market Characteristics
- Capital is characterized by mobility, sensitivity, and scarcity, and can be invested either directly (e.g., purchasing a house) or indirectly (e.g., buying stocks).
- Investment capital is used by individuals, businesses, and governments for funding and operational financing.
- Bonds and debentures represent debt instruments promising repayment with interest, while equity denotes ownership shares in companies aiming for profit through value appreciation.
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