Glossary

The following definitions may help you better understand the capital markets.

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Definitions starting with the letter A

Agent: A securities firm is classified as an agent when it acts on behalf of its clients as buyer or seller of a security. The agent does not own the security at any time during the transaction.
Alberta Securities Commission (ASC): The provincial regulatory agency responsible for overseeing the capital market in Alberta.
All-or-none order: An order that must be filled completely or the trade will not take place.
American-style options: Options that can be exercised any time during their lifetime. These are also known as open options.
Annual report: A publication, including financial statements and a report on operations, issued by a company to its shareholders at the company’s fiscal year-end.
Arbitrage: The simultaneous purchase of a security on one stock market and the sale of the same security on another stock market at prices which yield a profit.
Ask or offer: The lowest price at which someone is willing to sell the security. When combined with the bid price information, it forms the basis of a stock quote.
Assets: Everything a company or person owns, including money, securities, equipment and real estate. Assets include everything that is owed to the company or person. Assets are listed on a company’s balance sheet or an individual’s net worth statement.
Assignment: The notification to the seller of an option by the clearing corporation that the buyer of the option is enforcing the terms of the option’s contract.
At-the-money: When the price of the underlying equity, index or commodity equals the strike price of the option.
Averages and indices: Statistical tools that measure the state of the stock market or the economy, based on the performance of stocks, bonds or other components. Examples are the S&P/TSX Venture Composite Index, the S&P/TSX Composite Index, the Dow Jones Industrial Average and the Consumer Price Index.
Averaging down: Buying more of a security at a price that is lower than the price paid for the initial investment. The aim of averaging down is to reduce the average cost per unit of the investment.

Definitions starting with the letter B

Basis point

One-hundredth of a percentage point. For example, the difference between 5.25% and 5.50% is 25 basis points.

Bear market

A market in which stock prices are falling.

Best-efforts underwriting

A type of underwriting where the investment firm acts as an agent. The firm agrees to use its best efforts to sell the new issue of securities, but does not guarantee the issuing company that the securities to be issued will be sold.

Beta

A measurement of the relationship between the price of a stock and the movement of the whole market.

Better-price-limit orders

An order with a limit price better than the best price on the opposite side of the market. A better-priced buy order has a limit price higher than the best offering. A better-priced sell order has a limit price lower than the best bid. These are available only at the opening.

Bid

The highest price a buyer is willing to pay for a stock. When combined with the ask price information, it forms the basis of a stock quote.

Black-Scholes model

A mathematical model used to calculate the theoretical price of an option.

Block trades

Any trade for 10,000 shares or more, which has a value of at least $100,000.

Blue chip stocks

Stocks of leading and nationally known companies that offer a record of continuous dividend payments and other strong investment qualities.

Board lot

A regular trading unit. The board lot size of a stock on Toronto Stock Exchange or TSX Venture Exchange can be 1000, 500, or 100 shares depending on the price of the stock. An investor buying or selling a board lot usually pays less commission than an investor buying or selling an odd lot.

Security Price	Board lot size
$0.005 to $0.095	1,000 shares
$0.10 to $0.995	500 shares
$1.00 or over	100 shares

Book

An electronic record of all pending buy and sell orders for a particular stock.

Booked orders

Orders that do not trade immediately upon entry. These orders are also known as outstanding orders.

Bonds

Promissory notes issued by a corporation or government to its lenders, usually with a specified amount of interest for a specified length of time.

Bought-deal underwriting

A type of underwriting where the brokerage firm acts as principal. The brokerage firm risks its own capital to purchase all of the securities to be issued. If the price of the securities decreases before the brokerage firm has had a chance to resell the securities to its clients, the firm absorbs the loss.

British Columbia International Commercial Arbitration Centre (BCICAC)

An arbitration centre established to resolve business disputes that have not been resolved through normal channels. As part of its services, the centre will accept claims up to $50,000 from clients of participating member firms of the Investment Dealers Association of Canada (Pacific Division) and TSX Venture Exchange.

British Columbia Securities Commission (BCSC)

The provincial government agency responsible for administering and enforcing the Securities Act and the Commodity Contract Act of British Columbia.

Broker or brokerage firm

A securities firm or a registered wealth manager affiliated with a firm. Brokers are the link between investors and the stock market. When acting as a broker for the purchase or sale of listed stock, the wealth manager does not own the securities but acts as an agent for the buyer and seller and charges a commission for these services.

Bull market

A market in which stock prices are rising.

Buy-in

If a broker fails to deliver securities sold to another broker on the settlement date, the receiving broker may buy the securities at the current market price of the stock and charge the delivering broker the cost difference of such a purchase.

Definitions starting with the letter C

Call option: An option which gives the holder the right, but not the obligation, to buy a fixed amount of a certain stock at a specified price within a specified time. Calls are purchased by investors who expect a price increase.
Canadian Depository for Securities (CDS): The designated central clearing corporation for all equity trades in Canada.
Canadian Derivatives Clearing Corporation (CDCC): The designated central clearing corporation for options and futures trading on the Bourse de Montreal. Previously known as Trans Canada Options Inc. (TCO).
Canadian Investor Protection Fund (CIPF): A fund established to protect customers in the event of insolvency of a member of any of the following sponsoring self-regulatory organizations: the Bourse de Montréal, Toronto Stock Exchange, TSX Venture Exchange and the Investment Dealers Association of Canada.
Canadian Securities Institute (CSI): The national educational organization of the securities industry sponsored by the Investment Dealers Association of Canada, Toronto Stock Exchange, TSX Venture Exchange and the Bourse de Montréal.
Capital: To an economist, capital means machinery, factories and inventory required to produce other products. To investors, capital means their cash plus the financial assets they have invested in securities, their home and other fixed assets.
Capital gain or loss: Profit or loss resulting from the sale of certain assets classified under the federal income tax legislation as capital assets. This includes stocks and other investments such as investment property.
Capital pool companies: The TSX Venture Exchange Capital Pool Company (CPC) program offers a unique listing opportunity that brings experienced management teams with proven public financing ability together with development-stage companies in need of capital and management expertise. Unlike traditional public companies, capital pools list and begin trading without an operating business. The nature of their business is to find and acquire a promising early-stage venture, and their treasuries are funded expressly for the search and due diligence process.
Capital stock: All shares representing ownership of a company, including preferred and common shares.
Capitalization or capital structure: Total dollar amount of all money invested in a company, such as debt, preferred and common stock, contributed surplus and retained earnings of a company.
Cash: A special term attached to an equity order that requires the trade to be settled either the same day or the following business day for cash.
Cash settlement: Settlement of an option contract not by delivery of the underlying shares, but by a cash payment of the difference between the strike or exercise price and the underlying settlement price.
Certificate: The physical document that shows ownership of a bond, stock or other security.
Client order: An order from a retail customer of an investment dealer.
Closing transaction: An order to close out an existing open futures or options contract.
Commission: The fee charged by a wealth manager for buying or selling securities as an agent on behalf of a client.
Committee on Uniform Security Identification Procedure (CUSIP): CUSIP is a standard system of securities identification and securities description that is used in electronically processing and recording securities transactions in North America.
Commodities: Products used for commerce that are traded on a separate, authorized commodities exchange. Commodities include agricultural products and natural resources such as timber, oil and metals. Commodities are the basis for futures contracts traded on these exchanges.
Common shares or common stock: Securities that represent part ownership in a company and generally carry voting privileges. Common shareholders may be paid dividends, but only after preferred shareholders are paid. Common shareholders are last in line after creditors, debt holders and preferred shareholders to claim any of a company’s assets in the event of liquidation.
Complete fill: When an order trades all of its specified volume.
Continuous disclosure: A company’s ongoing obligation to inform the public of significant corporate events, both favourable and unfavourable.
Convertible: A feature of certain bonds, debentures and preferred shares. They may be exchanged by the holder usually for the common stock of the same company, in accordance with the terms of the conversion privilege.
Corporation or company: A form of business organization created under provincial or federal laws that has a legal identity separate from its owners. The shareholders are the corporation’s owners and are liable for the debts of the corporation only up to the amount of their investment. This is known as limited liability.
Crosses: A trade that occurs when two accounts within brokerage firms wish to buy and sell the same stock at an agreed price and volume. A cross can only occur at or between the current bid and ask for the stock.
Crossing session: After the close of the regular trading day, crosses can be executed between 4:05 p.m. and 5:00 p.m. ET at the last sale price of the stock.
Cum dividend: With dividend. The owner of shares purchased cum dividend is entitled to an upcoming already-declared dividend. The opposite of this is ex dividend.
Cum rights: With rights. The owner of shares purchased cum rights is entitled to forthcoming, already-declared rights. The opposite of this is ex rights.
Cyclical stock: A stock purchased from a company in an industry sector that is particularly sensitive to swings in economic conditions.

Definitions starting with the letter D

Daily price limit: The maximum price advance or decline permitted for a futures contract in one trading session compared to the previous day’s settlement price.
Day order: An order that is valid only for the day it is entered. If the order is still outstanding when the market closes, it will be purged overnight.
Debenture: A certificate of indebtedness of a government or company backed only by the general credit of the issuer and unsecured by property or assets.
Defensive stock: A stock purchased from a company that has maintained a record of stable earnings and continuous dividend payments through periods of economic downturn.
Delayed delivery order: A special term order in which there is a clear understanding between the buying and selling parties that the delivery of the securities will be delayed beyond the usual three-day settlement period to the date specified in the order.
Delist: The removal of a security’s listing on a stock exchange. This is done when the security no longer exists, the company is bankrupt, the public distribution of the security has dropped to an unacceptably low level, or the company has failed to comply with the terms of its listing agreement.
Delivery: The tender and receipt of the underlying commodity or the payment or receipt of cash in the settlement of an open futures contract.
Delivery month: The calendar month in which a futures contract may be satisfied by making or taking delivery.
Delta: A ratio that measures an option’s price movement compared to the underlying interest’s price movement. Delta values have a range of 0 to 1. Deep in-the-money options have deltas that approach 1.
Demand: The combined desire, ability and willingness on the part of consumers to buy goods or services. Demand is determined by income and by price, which are, in part, determined by supply.
Discretionary account: A securities account created when a client gives a partner, director or qualified portfolio manager of an investment dealer specific written authorization to select securities and execute trades on the client’s behalf.
Diversification: Limiting investment risk by purchasing different types of securities from different companies representing different sectors of the economy.
Dividend: An amount distributed out of a company’s profits to its shareholders in proportion to the number of shares they hold. A preferred dividend usually is for a fixed amount, while a common dividend may fluctuate with the profits of the company. A company is under no legal obligation to pay either preferred or common dividends.
Dividend yield: The dividend yield on either common or preferred stock is the indicated annual dividend expressed as a percentage of the current market price of the stock.
Dividend reinvestment plan: A means of reinvesting dividends, which would otherwise be paid to the shareholder in cash, in additional stock of the company.
Dollar cost averaging: Investing a fixed amount of dollars in a specific security at regular set intervals over a period of time. Dollar cost averaging results in a lower average cost per share, compared with purchasing a constant number of shares at set intervals. The investor buys more shares when the price is low and buys fewer shares when the price is high.
Dow Jones Industrial Average (DJIA): An average made up of 30 actively traded stocks. The DJIA is calculated by adding the prices of each of the 30 stocks and dividing by a divisor. The DJIA is one of the most widely quoted stock market averages in the media.
Downtick: A trade is on a downtick when the last trade occurred at a price lower than the previous one.

Definitions starting with the letter E

Equities: Common and preferred stocks, which represent a share in the ownership of a company.
Equity option: An option contract that grants the holder the right to buy or sell a specific number of shares of stock at a specified price during a specific period of time.
Escrow: Issued stock held separately from free-trading shares until certain conditions are met.
European-style option: Options that can be exercised only on their expiration date.
Ex dividend: The holder of shares purchased ex dividend is not entitled to an upcoming already-declared dividend, but is entitled to future dividends.
Ex right: The holder of shares purchased ex rights is not entitled to forthcoming rights.
Exchange offering prospectus (EOP): A form of prospectus that allows a company to conduct a prospectus offering through the facilities of a stock exchange, rather than issuing them directly to the public. The company then applies to list the securities on the exchange.
Exercise: The act of an option holder who chooses to take delivery (calls) or make delivery (puts) of the underlying interest against payment of the exercise price.
Expiration date or warrant right: The date at which an option contract expires. This means that the option can’t be exercised after that date

Definitions starting with the letter F

Filing statement: A disclosure document submitted by a listed company to outline material changes in its affairs. Filing statements are not used for the purposes of a financing.
Fill or kill (FOK) order: A tradable limit order marked "FOK" will trade as much stock as possible upon entry, but will immediately cancel or kill any unfilled volume.
Freeze: An interruption in trading on a stock, triggered when an order violates parameters set by Market Regulation Services Inc. for that particular stock.
Front month: The closest month to expiration for a futures or option contract.
Futures: Contracts to buy or sell securities at a future date.

Definitions starting with the letter G

Good delivery: The term used to describe a security that is in proper form to transfer title, which means that the registered owner has endorsed it. To settle a sale, the certificate must be surrendered on good delivery by the seller. A certificate that bears a share transfer restriction will not constitute good delivery.
Growth stock: The shares of companies that have enjoyed better-than-average growth over recent years and are expected to continue their climb.
Guaranteed investment certificate (GIC): A deposit instrument most commonly available from trust companies or banks requiring a minimum investment at a predetermined rate of interest for a stated term, such as one or five years. GICs are generally non-redeemable and non-transferable before maturity.

Definitions starting with the letter H

Halt: A halt stops all trading activity on a stock. Halts can only be authorized by Market Surveillance Officers, who also authorize trading activity to resume. Market Surveillance Officers can halt trading in stock any time there is unusual trading activity or the company releases material information.
Hedge: A strategy used to limit investment loss by making a transaction that offsets an existing position.

Definitions starting with the letter I

Improving the market: An order that either raises the bid price or lowers the offering price is said to be improving the market. The market improves because the spread between the bid and offer decreases.
Income stock: A security with a solid record of dividend payments and which offers a dividend yield higher than the average common stock.
Index: A statistical measure of the state of the stock market, based on the performance of stocks. Examples are the S&P/TSX Composite Index, the S&P/TSX Venture Composite Index, and the Dow Jones Industrial Average.
Inflation: An overall increase in prices for goods and services, usually measured by the percentage change in the Consumer Price Index.
Initial public offering (IPO): A company’s first issue of shares to the general public.
Inside Information: Non-public information pertaining to the business affairs of a corporation that could affect the company’s share price should the information be made public.
Insider: All directors and senior officers of a company, and those who are presumed to have access to inside information concerning the company. An insider is also anyone owning more than 10% of the voting shares of a company.
Insider trading: There are two types of insider trading. The first type occurs when insiders trade in the stock of their company. Insiders must report these transactions to the appropriate securities commissions. The other type of insider trading is when anyone trades securities based on material information that is not public knowledge. This type of insider trading is illegal.
Interlisted: A stock which is listed on one or more exchanges.
Intermarket Surveillance Group (ISG): An association of major U.S. stock exchanges, NASD (U.S.) members (the regulatory arm of NASDAQ), TSX Venture Exchange, Toronto Stock Exchange and the Bourse de Montréal, which shares regulatory information relevant to violations of rules in different markets.
Intrinsic value: The difference between the current market value of the underlying interest and the strike price of an option. In-the-money is a term used when the intrinsic value is positive.
Investment: The purchase or ownership of a security in order to earn income, capital or both. Investments may also include artwork, antiques and real estate.
Investment capital: Initial investment capital necessary for starting a business. Investment capital usually consists of inventory, equipment, pre-opening expenses and leaseholds.
Investment counsellor: A specialist in the investment industry paid by fee to provide advice and research to investors with large accounts.
Investment dealer: Securities firms that employ wealth managers to work with retail and institutional clients. Investment dealers have underwriting, trading and research departments.
Investment Dealers Association of Canada (IDA): The national self-regulatory organization of the securities industry. The Association’s role is to foster efficient capital markets by encouraging participation in the savings and investment process and by ensuring the integrity of the marketplace.
Investor relations: A corporate function, combining finance, marketing and communications, to provide investors with accurate information about a company’s performance and prospects.
Issue: Any of a company’s securities or the act of distributing the securities. Issued shares refer to the portion of a company’s shares that have been issued for sale. A company does not have to issue the total number of its authorized shares.

Definitions starting with the letter J

Junior corporation: A young company in the early stages of operations and growth.

Definitions starting with the letter L

Last trading day: The last day on which a futures or option contract may be traded.
Liabilities: The debts and obligations of a company or an individual. Current liabilities are debts due and payable within one year. Long-term liabilities are those payable after one year. Liabilities are found on a company’s balance sheet or an individual’s net worth statement.
Limit order: An order to buy or sell stock at a specified price. The order can be executed only at the specified price or better. A limit order sets the maximum price the client is willing to pay as a buyer, and the minimum price they are willing to accept as a seller.
Liquidating order: An order to close out an existing open futures or options contract. A liquidating order involves the sale of a contract that has been purchased or purchase of a contract that has been sold.
Liquidity: This refers to how easily securities can be bought or sold in the market. A security is liquid when there are enough units outstanding for large transactions to occur without a substantial change in price. Liquidity is one of the most important characteristics of a good market. Liquidity also refers to how easily investors can convert their securities into cash and to a corporation’s cash position, which is how much the value of the corporation’s current assets exceeds current liabilities.
Listed company: A company whose shares are publicly traded on a stock exchange.
Listed stock: Shares of a company that are traded on a stock exchange. Companies pay fees to the exchange to be listed and must abide by the rules and regulations set out by the exchange to maintain listing privileges.
Listing application: The document that a company completes and submits to an exchange when it applies to list its shares on the exchange. The company must disclose its activities, plans, management and finances in the application.
Long: A term that refers to ownership of securities. For example, if you are long 100 shares of XYZ, this means that you own 100 shares of XYZ company.

Definitions starting with the letter M

Margin account: A client account that uses credit from the investment dealer to buy a security. A client needs to deposit a margin amount with the balance advanced by the investment dealer against collateral such as investments. The investment dealer can make a margin call, which means the client must deposit more money or securities if the value of the account falls below a certain level. If the client does not meet the margin call, the dealer can sell the securities in the margin account at a possible loss to cover the balance owed. The investment dealer also charges the client interest on the money borrowed to buy the securities.
Market: The place where buyers and sellers meet to exchange goods and services. It also represents the actual or potential demand for a product or service.
Market capitalization: A company’s market capitalization for a security is calculated by multiplying the last board lot price at the close of trading on the most recent market close by the number of shares outstanding, net of any escrowed shares.
Market maker: A trader employed by a securities firm who is required to maintain reasonable liquidity in securities markets by making firm bids or offers for one or more designated securities up to a specified minimum guaranteed fill. Exchanges may have different designations for these individuals. For example, market makers for the stock of companies listed on Toronto Stock Exchange are referred to as Registered Traders.
Market order: An order to buy or sell stock immediately at the best current price.
Material change: A change in a company’s affairs that could have a significant effect on the market value of its securities, such as a change in the nature of the business or control of the company. Under the principle of continuous disclosure, a listed company must issue a news release and report to the applicable self-regulatory organization as soon as a material change occurs.
Member firm: A brokerage firm or investment dealer that owns a seat on TSX Venture Exchange, or is a member of the Investment Dealers Association of Canada. Also known at Toronto Stock Exchange as a Participating Organization.
Minimum fill order: A special term order with a minimum fill condition will only begin to trade if its first fill has the required minimum number of shares. For example, an order to buy 5,000 shares with a minimum volume of 2,000 shares can only trade if 2,000 or more shares become available.
Minimum guaranteed fill (MGF) orders: These orders are guaranteed a complete fill upon entry. On Toronto Stock Exchange, a Registered Trader will provide the stock should the book be below the required limit. To be eligible for MGF, an order has to be a tradable client order with a volume less than or equal to the MGF size, which varies from stock to stock.
Minimum price fluctuation: The minimum price change or tick on a futures contract.
Mixed lot or broken lot: An order with a volume that combines any number of board lots and an odd lot.
Money market: Part of the capital market established to buy and sell short-term financial obligations. These include federal government treasury bills, short-term Government of Canada bonds, commercial paper, bankers’ acceptances and guaranteed investment certificates. Longer-term securities are also traded in the money market when their term shortens to three years.
Multi-jurisdictional disclosure system (MJDS): A disclosure system that facilitates certain Canadian-U.S. cross-border securities offerings, issuer bids and takeover bids. It is intended to reduce costly duplication of disclosure requirements and other filings when issuers from one country register securities offerings in the other. Under the rules, eligible cross-border offerings are governed by the disclosure requirements of the issuer’s home country.
Must-be-filled (MBF) order: Orders placed before the market opens to buy or sell shares of stocks when their options expire. These orders are guaranteed a complete fill at the opening price to offset expiring options. On Toronto Stock Exchange they must be ordered between 4:05 p.m. and 5:00 p.m. on the Thursday before the third Friday of each month.
Mutual fund: A fund managed by an expert who invests in stocks, bonds, options, money market instruments or other securities. Mutual fund units can be purchased through brokers or, in some cases, directly from the mutual fund company.

Definitions starting with the letter N

Naked writer: A seller of an option contract who does not own a position in the underlying security.
Net change: The difference between the previous day’s closing price and the last traded price.
Net earnings: A company’s remaining profits after all expenses and taxes have been paid. Dividends may be paid from net earnings.
Net worth: The difference between a company’s or individual’s total assets and its total liabilities. Also known as shareholders’ equity for a company.
New issue: A stock or bond issue sold by a company for the first time. Proceeds may be used to retire the company’s outstanding securities, or be used for a new plant, equipment or additional working capital. New debt issues are also offered by governments.
Non-certificated issues: An issue that is recorded on the transfer agent’s electronic book rather than being held as a physical note.
Non-client order: An order from an investment dealer or an order a firm is executing on behalf of an institution, such as a mutual fund.
Non-exempt company: A listed company that is subject to special reporting rules.
Non-net order: A special-term order when there is a clear understanding between the buying and selling parties that they will settle the trade directly with each other.
Non-resident order: A special term order when one or more participants in the trade is not a Canadian resident.

Definitions starting with the letter O

Odd lot: A number of shares that are less than a board lot, which is the regular trading unit decided upon by the particular stock exchange. An odd lot is also an amount that is less than the par value of one trading unit on the over-the-counter market. For example, if a board lot is 100 shares, an odd lot would be 99 or fewer shares.
Offer: See Ask
Offset: To liquidate or close out an open futures or option contract.
On-stop (O/S) order: A special-term order placed with the intention of trading at a later date when the price of the stock reaches the specified stop price. An on stop order becomes a limit order once a trade at the trigger price has occurred.
Ontario Securities Commission: The government agency that administers the Securities Act (Ontario) and the Commodity Futures Act (Ontario) and regulates securities and listed futures contract transactions in Ontario.
Open interest: The net open positions of a futures or option contract.
Open order: An order that remains in the system for more than a day. See good till cancelled or good till date.
Option: The right, but not the obligation, to buy or sell certain securities at a specified price within a specified time. A put option gives the holder the right to sell the security, and a call option gives the holder the right to buy the security.
Option class: All options of the same type, either calls or puts, that have the same underlying security.
Option cycle: A set pattern of months when a class of options expires.
Option holder: The buyer of an option contract who has the right to exercise the option during its lifetime.
Option series: An individual option contract for a given security.
Option type: A call or put contract.
Option writer: The seller of an option contract who may be required to deliver (call option) or to purchase (put option) the underlying interest covered by the option, before the contract expires.
Over-the-counter (OTC) market: The market maintained by securities dealers for issues not listed on a stock exchange. Almost all bonds and debentures, as well as some stocks, are traded over-the-counter in Canada. An OTC market is also known as an unlisted market.
Odd lot: A number of shares that are less than a board lot, which is the regular trading unit decided upon by the particular stock exchange. An odd lot is also an amount that is less than the par value of one trading unit on the over-the-counter market. For example, if a board lot is 100 shares, an odd lot would be 99 or fewer shares.
Offer: See Ask
Offset: To liquidate or close out an open futures or option contract.
On-stop (O/S) order: A special-term order placed with the intention of trading at a later date when the price of the stock reaches the specified stop price. An on stop order becomes a limit order once a trade at the trigger price has occurred.
Ontario Securities Commission: The government agency that administers the Securities Act (Ontario) and the Commodity Futures Act (Ontario) and regulates securities and listed futures contract transactions in Ontario.
Open interest: The net open positions of a futures or option contract.
Open order: An order that remains in the system for more than a day. See good till cancelled or good till date.
Option: The right, but not the obligation, to buy or sell certain securities at a specified price within a specified time. A put option gives the holder the right to sell the security, and a call option gives the holder the right to buy the security.
Option class: All options of the same type, either calls or puts, that have the same underlying security.
Option cycle: A set pattern of months when a class of options expires.
Option holder: The buyer of an option contract who has the right to exercise the option during its lifetime.
Option series: An individual option contract for a given security.
Option type: A call or put contract.
Option writer: The seller of an option contract who may be required to deliver (call option) or to purchase (put option) the underlying interest covered by the option, before the contract expires.
Over-the-counter (OTC) market: The market maintained by securities dealers for issues not listed on a stock exchange. Almost all bonds and debentures, as well as some stocks, are traded over-the-counter in Canada. An OTC market is also known as an unlisted market.

Definitions starting with the letter P

Par value: A security’s nominal face value.
Partial fill: An order receives a partial fill when it trades only part of its total committed volume.
Participating Organization: A firm entitled to trade through Toronto Stock Exchange or TSX Venture Exchange. Participating Organizations are involved in all aspects of the securities business, including underwriting new issues, corporate finance and assisting companies in the IPO process. The equivalent of a Toronto Stock Exchange Participating Organization is known as a Member Firm on TSX Venture Exchange.
Penny stock: Low-priced speculative issues of stock selling at less than $1.00 a share.
Portfolio: Holdings of securities by an individual or institution. A portfolio may include various types of securities representing different companies and industry sectors.
Position limit: The maximum number of futures or options contracts any individual or group of people acting together may hold at one time.
Preferred shares: A class of stock that entitles shareholders to a fixed dividend that is paid before dividends to common shareholders. Preferred shareholders are also entitled to a stated dollar value per share if the company liquidates. Preferred shareholders usually don’t have voting rights. Preferred shares are generally considered income investments.
Premium: An option contract’s price.
Price-earnings (P/E) Ratio: A common stock’s last closing market price per share divided by the latest reported 12-month earnings per share. This ratio shows you how many times the actual or anticipated annual earnings a stock is trading at.
Principal trade: A trade when an investment dealer is either buying from, or selling to its client.
Priority: If there are several orders competing for a stock at the same price, a priority determines when one of these orders will be filled before any other at this price. Priority is based on the time at which the order is received into the system.
Private placement: The private offering of a security to a small group of buyers. Resale of the security is limited. See best efforts and bought deal underwriting.
Profit: What is left over for the owners of a business after all expenses have been deducted from revenues. Gross profit is the profit before corporate income taxes. Net profit is the final profit of the business after taxes have been paid.
Prospectus: A legal document describing securities being offered for sale to the public. It must be prepared in accordance with provincial securities commission regulations. Prospectus documents usually disclose pertinent information concerning the company’s operations, securities, management and purpose of the offering.
Public float: The number of issued and outstanding shares of a company, excluding shares held by persons who, individually or in conjunction with other persons, hold 20% or more of the company’s voting securities.
Push-out: A push-out occurs during a stock split when new shares are forwarded to the registered holders of old share certificates, without the holders having to surrender the old shares. Both the old and new shares have equal value.
Put option: A put option is a contract that gives the holder the right to sell a specified number of shares at a stated price within a fixed time period. Put options are purchased by those who think a stock may decline in price.

Definitions starting with the letter Q

Quoted market value (QMV): The applicable listed securities of the issuer that are issued and outstanding multiplied by the closing price of such securities on the exchange which they are listed as at the most recent market close.

Definitions starting with the letter R

Rally: A brisk rise in the general price level of the market or price of a stock.
Record date: The date when a shareholder must own shares to receive a dividend or right.
Registered traders: A trader employed by a securities firm who is required to maintain reasonable liquidity in securities markets by making firm bids or offers for one or more designated securities up to a specified minimum guaranteed fill.
Revenue: The total amount of funds generated by a business.
Reverse takeover (RTO): A method of listing on a stock exchange when a private company acquires or takes over the shares of a listed company.
Rights: A temporary privilege that lets shareholders purchase additional shares directly from the company at a stated price. The price is usually less than the market price of the common shares on the day the rights are issued. The rights are only valid within a given time period.
Risk: The future chance or probability of loss.

Definitions starting with the letter S

S&P/TSX Venture Composite Index: Formally known as the S&P/CDNX Composite Index, it provides a benchmark used to measure the price performance of the Canadian venture capital equity market.
S&P/TSX Composite Index: A benchmark used to measure the price performance of the broad Canadian equity market.
Seat: The traditional term for membership on a stock exchange. An investment dealer or brokerage buys a seat on the exchange and one employee is designated as the seat holder. As the Toronto Stock Exchange is now a publicly held company, there are no longer seats on this exchange.
Securities: Transferable certificates of ownership of investment products such as notes, bonds, stocks, futures contracts and options.
Securities commission: Each province has a securities commission or administrator that oversees the provincial securities act. This act is a set of laws and regulations that set down the rules under which securities may be issued or traded in that province.
Securities and Exchange Commission (SEC): The federal regulatory body for interstate securities transactions in the United States.
Securities Industry Association (SIA): The trade association representing more than 600 securities firms throughout Canada and the United States. Members include banks, brokers, dealers and mutual fund companies.
SEDAR*: The System for Electronic Document Analysis Retrieval. SEDAR is an electronic filing system that allows listed companies to file prospectuses and continuous disclosure documents. The Canadian Securities Administrators, Canadian Depository for Securities Limited and the filing community developed it, with co-operation from legal firms and stock exchanges.
SEDAR¹ is a trademark of the Canadian Securities Administrators.
Seed stock: The shares or stock sold by a company to provide start-up capital before carrying out an initial public offering (IPO).
Self-regulatory organization: An organization recognized by securities administrators as having powers to establish and enforce industry regulations to protect investors and to maintain fair, equitable and ethical practices in the security industry. Examples include the Ontario Securities Commission and the Investment Dealers Association.
Settlement: The process that follows a transaction when the seller delivers the security to the buyer and the buyer pays the seller for the security.
Settlement date: The date when a securities buyer must pay for a purchase or a seller must deliver the securities sold. Settlement must be made on or before the third business day following the transaction date in most cases.
Settlement price: The price used to determine the daily net gains or losses in the value of an open futures or options contract.
Share certificate: A paper certificate that represents the number of shares an investor owns.
Shares in escrow: The number of issued shares that are currently subject to escrow restrictions. Escrow shares are issued non-tradable stock held separately from free-trading shares until certain conditions are met.
Short selling: The sale of securities that the seller does not own. This is a speculative practice done when the seller believes a stock’s price is going to fall and the seller will be able to cover the sale by buying the security back at a lower price. The profit is the difference between the initial selling price and the subsequent purchase price. It is illegal for a seller not to declare a short sale when placing the order.
Special terms: Orders which must trade under special conditions. For example, a cash order will be settled sooner than the usual three-day settlement period.
Speculator: Someone prepared to accept calculated risks in the marketplace for attractive potential returns.
Split: A division of a company’s outstanding shares into a larger number of shares. Each outstanding share entitles its owner to a pre-determined number of new shares.
Spread: The difference between the bid and the ask prices of a stock.
Stock index futures: Futures contracts which have a stock index as the underlying interest.
Stock price index: A statistical measure of the state of the stock market, based on the performance of certain stocks. Examples include the S&P/TSX Composite Index and the S&P/TSX Venture Composite Index.
Stock symbol: A one to three-character root symbol that represents a company listed on the exchange. This symbol is uniform throughout Canada.
Street certificate: These are certificates registered in the name of a securities firm rather than the owner of the security. This makes the certificate easily transferable to a new owner.
Strike price: The price the owner of an option can purchase or sell the underlying security. The purchases and sales are also known as calls and puts.

Definitions starting with the letter T

Thin market: A market that occurs when there are comparatively few bids to buy or offers to sell, or both. The phrase may apply to a single security or to the entire stock market. In a thin market, price fluctuations between transactions are usually larger than when the market is liquid. A thin market in a particular stock may reflect lack of interest in that issue, or a limited supply of the stock.
Tick: Slang used for minimum spread. Depending on the stock price it could be a half-cent, one cent or five cents.
Ticker tape: Each time a stock is bought and sold, it is displayed on an electronic ticker tape. It is a record of current trading activity on an exchange.
Ticket fee: The administrative fee charged for each trade.
Time value: The difference between an option’s premium and its intrinsic value.
Timely disclosure policy: This policy requires all listed companies to publicly disclose material information in a timely manner.
Total number of shares: The total number of issued and outstanding shares for the security.
Transaction date: The date when the purchase or sale of a security takes place.
Trading halt: A trading halt is imposed by the exchange, usually due to the dissemination of news that might impact a stock’s price.
Trading symbol: The symbol, usually one to three letters, which is shorthand for the names of listed stocks. Also known as stock symbol.
Transfer agent: A trust company appointed by a listed company to keep a record of the names, addresses and number of shares held by its shareholders. Frequently, the transfer agent also distributes dividend cheques to the company’s shareholders.

Definitions starting with the letter U

Underlying interest: The specific security, commodity, index or financial instrument in which an option or futures contract is traded.
Underwriting: The purchase for resale of a new issue of securities by an investment dealer or group of dealers who are also known as underwriters. The formal agreements for these transactions are called underwriting agreements.
Unlisted: A security not listed on a stock exchange, but traded on the Over-the-Counter market.
Uptick: A stock is said to be on an uptick when the last trade occurred at a higher price than the one before it.

Definitions starting with the letter V

Venture capital: Money raised by companies to finance new ventures.
Venture company: A general term referring to a company in the early stages of development.
Volatility: A statistical measure of changes in price over a period of time.
Volume: Volume is the number of shares traded during a specified time period, i.e., day, week or month.

Definitions starting with the letter W

Warrant: A certificate that gives the holder the right to buy the underlying security at a set price for a specified time directly from the company.
Wealth Manager: A person employed by an investment dealer who provides investment advice to clients and executes trades on their behalf in securities and other investment products.
World Federation of Exchanges (WFE): The World Federation of Exchanges (WFE) is a global trade association for the exchange industry. The membership is comprised of 56 regulated exchanges from all regions of the world. Together, these exchanges account for over 97% of world stock market capitalization, and most of its exchange-traded futures, options, listed investment funds, and bonds.
Writer: The seller of an option. The writer has an obligation associated with the contract to either purchase or sell a specified number of shares at the strike price on or before expiry.

Definitions starting with the letter Y

Yield: This is the measure of the return on an investment and is shown as a percentage. A stock yield is calculated by dividing the annual dividend by the stock’s current market price. For example, a stock selling at $50 and with an annual dividend of $5 per share yields 10%. A bond yield is a more complicated calculation, involving annual interest payments, plus amortizing the difference between its current market price and par value over the life of the bond.

Notes

SEDAR est une marque de commerce des Autorités canadiennes en valeurs mobilières.