Montréal Exchange Overview
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Questions and Answers

Which of the following is considered the first line of business in the insurance industry?

  • Health and disability insurance
  • Property and casualty insurance
  • Auto insurance
  • Life insurance (correct)

    • What is primarily evaluated during the underwriting process in the insurance business?

  • Client satisfaction
  • Investment opportunities
  • Insurance regulatory compliance
  • Risk and contractual responsibility (correct)

    • Which insurance product is exclusively offered by life insurance companies according to federal legislation?

  • Auto insurance
  • Health insurance
  • Property insurance
  • Annuities (correct)

    • According to the Insurance Bureau of Canada, which type of insurance generates the largest aggregate premiums in property and casualty insurance?

    <p>Automobile insurance</p> Signup and view all the answers

    What is primarily facilitated by financial intermediaries in the securities industry?

    <p>The transfer of capital from suppliers to users</p> Signup and view all the answers

    What is the primary purpose of reinsurance in the insurance industry?

    <p>To exchange risk between insurance companies</p> Signup and view all the answers

    Which market involves the trading of existing securities rather than new issues?

    <p>Secondary market</p> Signup and view all the answers

    What is a characteristic of institutional investors in the securities industry?

    <p>They operate mainly in unlisted markets.</p> Signup and view all the answers

    Which financial intermediaries are prohibited from selling insurance directly through their branch networks?

    <p>Schedule I banks</p> Signup and view all the answers

    What are equity securities primarily composed of?

    <p>Common shares and preferred shares</p> Signup and view all the answers

    What aspect of the insurance business is regarded as the most important in Canada?

    <p>Underwriting</p> Signup and view all the answers

    What type of insurance does NOT fall under property and casualty insurance?

    <p>Health and disability insurance</p> Signup and view all the answers

    In the context of capital markets, what does the term 'retail investor' refer to?

    <p>A small individual investor engaging independently</p> Signup and view all the answers

    Which legislation governs the operations of insurance companies in Canada?

    <p>Insurance Companies Act</p> Signup and view all the answers

    What is the primary function of the primary market?

    <p>To facilitate the issuance of new equity and debt</p> Signup and view all the answers

    Which of the following banks is NOT one of Canada's Big Six Banks?

    <p>Bank of Nova Scotia</p> Signup and view all the answers

    What percentage of voting shares can a single shareholder own in a medium-sized Schedule I bank?

    <p>65%</p> Signup and view all the answers

    Which of the following best describes the Toronto Stock Exchange?

    <p>A regulated stock exchange for trading equity securities</p> Signup and view all the answers

    Which of the following is NOT a component of life insurance?

    <p>Time-limited life insurance</p> Signup and view all the answers

    What distinguishes a preferred share from a common share?

    <p>Preferred shares generally provide fixed dividends before common shares receive any.</p> Signup and view all the answers

    Which of the following services is typically offered by Canadian banks?

    <p>Wealth management</p> Signup and view all the answers

    What type of market is characterized by trading securities that are not listed on a formal exchange?

    <p>OTC market</p> Signup and view all the answers

    What is the primary purpose of the Canada Deposit Insurance Corporation (CDIC)?

    <p>To insure savings deposits</p> Signup and view all the answers

    What is a key characteristic of voting shares in Canada's Schedule I banks?

    <p>Control of any single shareholder is limited to 20%</p> Signup and view all the answers

    Which of the following statements about Canadian bank regulation is accurate?

    <p>Small banks do not have share ownership restrictions</p> Signup and view all the answers

    How do Canada's Big Six banks primarily centralize savings?

    <p>By establishing thousands of retail branches</p> Signup and view all the answers

    Which of the following is a legislative requirement for banks regarding customer information sharing?

    <p>They cannot share information without customer consent</p> Signup and view all the answers

    What distinguishes large Schedule I banks from medium-sized banks in terms of shareholder control?

    <p>Large banks are limited to 20% control by any single group</p> Signup and view all the answers

    What is the primary factor that influences the movement of capital across borders?

    <p>Anticipation of changes to taxation and risk-adjusted returns</p> Signup and view all the answers

    Which of the following best describes the role of savings in capital supply?

    <p>Savings serve as the only source of capital available for investment.</p> Signup and view all the answers

    What impact does deficient capital investment have on an economy?

    <p>Leads to higher unemployment and declining living standards.</p> Signup and view all the answers

    How does the compensation to postpone current consumption influence individual savings behavior?

    <p>High compensation increases the tendency to save for future spending.</p> Signup and view all the answers

    Which of the following factors does NOT play a role in determining the flow of capital?

    <p>Current interest rates on savings accounts</p> Signup and view all the answers

    What contributes to a skilled and productive labor force in relation to capital investment?

    <p>Significant capital investment in education and training</p> Signup and view all the answers

    To what extent does monetary policy focus on managing the money supply?

    <p>It also includes maintaining price and foreign exchange stability.</p> Signup and view all the answers

    Which of the following is a consequence of high taxes on capital movement?

    <p>Increased movement of capital towards countries with lower taxes.</p> Signup and view all the answers

    What is the relationship between risk, return, and capital movement?

    <p>Investors prefer locations that offer the highest risk-adjusted returns.</p> Signup and view all the answers

    What is a likely behavior of investors when there is an increase in tax incentives?

    <p>They will likely increase their savings and investments.</p> Signup and view all the answers

    What is a requirement for alternative trading systems (ATS) in Ontario?

    <p>They must be registered as an investment dealer and a member of CIRO.</p> Signup and view all the answers

    Which of the following is NOT a function that alternative trading systems can perform?

    <p>Listing securities for trading.</p> Signup and view all the answers

    What distinguishes CanDeal in the fixed-income electronic trading market in Canada?

    <p>It provides access to government securities and money market instruments.</p> Signup and view all the answers

    Which statement about the Canadian Securities Administrators' stance on ATSs is accurate?

    <p>ATSs are allowed to compete with recognized exchanges and other ATSs.</p> Signup and view all the answers

    What is a common characteristic of both traditional exchanges and ATSs?

    <p>Both provide similar trading services.</p> Signup and view all the answers

    What is a key limitation of ATSs compared to traditional exchanges?

    <p>ATSs cannot list securities but can trade those listed on traditional exchanges.</p> Signup and view all the answers

    Study Notes

    Introduction to the Securities Industry

    • The securities industry is crucial for sustaining and enhancing the Canadian economy, adapting to investors' domestic and international needs.
    • Key components include financial intermediaries, financial markets, and financial instruments, facilitating the transfer of capital from suppliers to users.

    Investment Capital

    • Over 30 domestic Schedule I banks operate in Canada, with "Big Six" banks leading in asset size: BMO, CIBC, National Bank, RBC, Scotiabank, and TD Bank Group.
    • Schedule I banks attract savings through extensive branch networks and ATMs, allowing for a centralized savings system.

    Bank Regulations

    • Voting shares in large Schedule I banks must be widely held, restricting single shareholder control to 20%.
    • Medium-sized banks can have a single shareholder own up to 65% of voting shares, while small banks can be fully owned by one entity.

    Banking Products and Services

    • Canadian banks provide diverse services including mortgages, loans, accounts, investments, financial planning, and wealth management.
    • Savings deposits are insured by the Canada Deposit Insurance Corporation (CDIC).

    Insurance Industry

    • Life insurance companies must cautiously manage investments to meet contractual obligations for policyholders.
    • Property and casualty insurance protects against loss of home, auto, and commercial business, with automobile insurance generating the largest premiums.

    Regulatory Framework

    • The Insurance Companies Act governs insurance companies, permitting certain financial activities while restricting others, such as in-house trust services.
    • Life insurance companies uniquely offer annuities and segregated funds.

    Alternative Financial Intermediaries

    • Various financial intermediaries, alongside banks, facilitate an effective financial services landscape in Canada.
    • Monetary and fiscal policies significantly influence investment opportunities and capital management.

    Supply and Demand for Capital

    • An adequate supply of capital is essential for expanding manufacturing, enhancing productivity, and improving living standards.
    • Capital supply primarily comes from individual and collective savings, which can be influenced by incentives like tax breaks.

    Alternative Trading Systems (ATS)

    • ATSs are electronic marketplaces that execute trades autonomously in equity and fixed-income markets, competing with traditional exchanges.
    • ATSs must register as investment dealers and comply with Canadian regulatory standards; however, they cannot list securities.

    Fixed-Income Trading Markets

    • Canada houses several fixed-income electronic trading systems, such as CanDeal and CBID, facilitating trading in government securities and money market instruments.
    • CanDeal, a joint venture of the six largest bank-owned investment dealers, operates under the TMX Group and serves institutional investors.

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    Description

    Test your knowledge on the Montréal Exchange and its various components, such as over-the-counter markets, preferred shares, and different types of investors. This quiz will cover essential terms and concepts relevant to trading and investment markets in Canada.

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