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Investing Terminology

Accrued Interest
The accumulated interest paid to a seller of a bond by the buyer (unless the bond is in default). The buyer of a fixed-income security must pay the seller of the security to compensate the seller for holding the security between the last coupon date and the settlement date.
Agency Bonds
Bonds issued by Federal Crown Corporations. These agencies are special purpose corporations created by an act of the Canadian parliament. These Corporations are either direct obligations of the Government of Canada or fully guaranteed by the Government of Canada and carry the same credit quality. Examples of these agencies are Export Development Bank, Canadian Mortgage and Housing Corp., Farm Credit Corporation and Business Development Bank of Canada.
The process of incrementally reducing debt through installment payments of principal and interest.
The simultaneous sale and purchase of the same or equal security in such a way as to take advantage of a price difference in separate markets.
Interest or dividends that were not paid when due and are still owed.
Ask Price
The lowest price a prospective seller is willing to accept.
A large principal repayment in the later years of some serial bonds.
Bankers' Acceptance (BA's)
BA's are short term promissory notes issued by corporations with the unconditional guarantee of a major Canadian chartered bank. The guarantee reduces risk and consequently increases price and lowers yield compared to Commercial Paper. BA's are typically issued in terms of 30 days, 60 days, 90 days, 6 months and a year. When these notes are issued directly by financial institutions they are called Bearer Deposit Notes (BDN's).
Bank of Canada
The central Bank of Canada was founded in the 1930s to facilitate the functioning of the financial system. The Bank conducts monetary policy to manage the Canada's money supply and influence interest rates. In addition, it is responsible for issuance of currency and advises the government on foreign exchange and fiscal policy.
Bank Rate
The minimum rate at which the Bank of Canada will make short-term advances to the chartered banks and money-market dealers. The trend of the bank Rate affects the prime lending rate that chartered banks give to their most creditworthy borrowers. It is therefore a base for the general level of short-term interest rates and a very important determinant of bond market prices.
Basis Point
One one-hundredth of a percentage point. This is the most common measure of changes in bond yields. For example, if a bond yielding 6.09% changes in price to yield 6.20%, it is said to have increased 11 basis points. Basis points (bps) are commonly referred to as "beeps".
Bear Market
A prolonged period of time for which the prices of bonds are decreasing and yields are rising.
Bearer Bonds
Bonds that do not have the owner’s name registered on the books of the issuing corporation or government and are payable to the bearer. Bearer bonds are negotiable by the holder, since it is not in registered form.
In the bond market, the commonly quoted and actively traded mid-term and long-term Government of Canada bonds. In the United States, they are the most recently issued 10-year and 30-year treasury bonds. Benchmarks, also known as bellwethers, are usually considered to be a measure of the direction and magnitude of yield and price changes in the bond market.
Bid Price
The highest price a prospective buyer is willing to pay.
Evidence of a debt on which the issuer promises to pay the holder in a prescribed amount of time a specified amount of both interest and principal. Technically, a bond has assets pledged against it as security for the loan with the exception of government bonds. In practice, however, the term is often used to describe debentures; these evidences of indebtedness are backed by the general creditworthiness of the issuer and are not secured by assets.
Bond Rating
A measure of expected performance, quality and safety of a bond issue. Dominion Bond Rating Service (DBRS) is the primary rating service in Canada. Moody's and Standard and Poor's are the two largest agencies in the United States.
Bond Ratio
The percentage of a company's outstanding debt as a part of the company's total capitalization. This ratio is used by analysts to assess risk inherent in a particular issue or company's debt.
Bonded Debt
Also known as funded debt. It is the portion of an issuer's total debt represented by longer term bonds.
Book Entry Bond / BEO (book entry only)
A bond that has no certificate. Records of ownership are are kept by a depository and its members (banks and brokerage firms). Bonds issued now are almost exclusively book-entry, or book-based.
Bull Market
A period of rising bond prices and declining yields.
The action taken to pay the principal of bond prior to the stated maturity date.
Callable Bond
A condition of a bond permitting the issuer to redeem it before maturity on specified dates at specified prices.
Call Protection
A dollar amount paid as a penalty or premium by an issuer who exercises the right to redeem securities prior to the maturity date. It is a also used to describe a period of time in which the bond cannot be called.
Canada Call (Doomsday Call)
A Canada call issue is simply a bond which may be called back by the issuer to redeem the debt prior to the maturity date at an equivalent yield of a Government of Canada bond of the same maturity plus a premium (example, Canada call + 15bps). The holder of the bond is paid the calculated price (based on the yield plus the additional 15bps) or par whichever is higher. Typically there are not many doomsday calls redeemed before maturity as it is not advantageous for the issuer to do so. This feature is more commonly attached to corporate issues.
Canadian Bond Rating Service / CBRS
Effective October 31, 2000, CBRS combined operations with Standard & Poor's. S&P provides credit ratings of Canadian borrowers in the bond market. They specialize in publishing unbiased research on the credit quality of public sector debt and corporate bonds. See also S&P Credit Ratings.
The term is often used when referring to marketable bonds issued by the Canadian Government.
Certificate of Deposit
Negotiable certificates issued by most chartered banks and trust companies, usually with minimum face value of $5,000 and denominations of $1,000. Maturity terms vary from 30 days to 5 years. Although the term to maturity is fixed, CDs may be pre-encashable at a penalty rate lower than the original fixed rate.
Closing Quotation
A market maker's final bid and asked prices for an issue at the end of a business day.
Assets pledged by a borrower until a loan is repaid. These assets are subject to seizure if the loan is in default.
Commercial Paper
Short-term debt issued by non-financial corporations with terms up to one year. This paper is sold at a discount and matures at par. It is typically available in terms of 30 days, 60 days, 90 days, 6 months and a year. The difference between cost of proceeds and the maturity amount is treated as interest income. All commercial paper offered by
TD Waterhouse Canada Inc.
is rated R-1(Prime Credit Quality) by the Dominion Bond Rating Service.
A fee paid to an investment dealer when the dealer acts as an agent in a securities transaction. The dealer does not receive a commission when acting as a principal in the trade.
Convertible Bond
A bond, debenture or preferred share which may be exchanged for common shares usually of the same company, at a set price and usually by a set date. A forced conversion clause may be used by a company to force an exchange if the value of its common shares goes above the value of the conversion ratio or conversion price. Most convertible bonds trade on a listed exchange such as the TSE.
Corporate Bond
These are debt instruments companies issue that are considered financial obligations of a corporation. Generally, corporate bonds are broken down into four sectors: industrial, financial, transportation, and utility. They can be issued in both callable and non-callable formats.
This is the portion of the bond that provides the holder an interest payment at a pre-determined rate. Coupons are the amount of interest that will be paid on annual basis. Most bonds, however, pay interest semi-annually.
Coupon Frequency
Most bonds pay interest on a semi-annual basis. For example, a holder of 10000 face of a 6.50% Government of Canada bond maturing 1 June 2004 would receive $650.00 interest annually (10000 * 6.50%). The interest would be broken down into two $325.00 payments; one on June 1st and the other on December 1st. Some bonds pay interest on a monthly basis and others, such as Eurobonds, pay interest annually.
Current Yield
A crude measure of an investor's return on a bond calculated by dividing the annual interest on the bond by the market price. It does not take into account any capital gain or loss. For example, a bond with a 10% coupon bought at discount of $80.00 has a current yield of 12.5% (10%/800 per 1000 face).
The 9-digit alpha-numeric ID assigned to securities including bonds by the Committee on Uniform Security Identification Procedures. It was established as a uniform method of identifying securities.
An individual or firm acting as a principal rather than a broker or agent. An individual or entity, such as a securities firm, that acts as a principal and stands ready to buy and sell for its own account. A dealer buys and sells securities and holds inventory.
Indebtedness of a government or corporation that is backed strictly by the general credit of the issuer. Unlike a bond, no assets are pledged against a debenture. In practice, the terms bonds and debentures are often used interchangeably.
A term used when a company breaks the terms of an agreement. For example, a company who fails to make a scheduled bond interest payment is said to be in default.
The face amount or value of a bond. This is the amount the issuer agrees to pay on maturity. It also refers to the investment increment of bonds. For example, the minimum purchase or sell amount of a bond on WebBroker is $5,000 face with increments of $1,000 thereafter. The $5,000 minimum applies to strip bonds as well. Higher minimums apply to money market instruments and vary depending on issuer and term-to-maturity.
The difference between a bond's current market price and its face value. Generally, bonds with coupons below the prevailing interest rate will trade at a discount.
Discount Yield
The yield on money market instruments which are sold at a discount. Take, for example, a Government of Canada Treasury Bill sold at a cost of 98.60 ($9,860 per $10,000) and maturing at $10,000. To determine the yield, divide the discount ($140) by the cost ($9860) and multiply that number by 365 (days) divided by the number of days to maturity (90). The calculation results in a yield of 5.758%.
Discount Yield = [ (100-Price) / Price ] * [ (365*100) / Term ]

= [ (100-98.60) / 98.60 ] * [ (365*100) / 90 ]

= 5.75%

The practice of buying several different types of securities over different asset classes, economic sectors, and maturities in order to reduce risk if one particular type of investment or sector performs poorly. Fixed Income securities are integral to asset class diversification. Within fixed income, investors can diversify by holding debt issued by companies in different sectors. Varying terms to maturity can also mitigate yield curve and reinvestment risk.
Dominion Bond Rating Service / DBRS
DBRS is an independent rating agency that assesses an entity’s ability to make timely payments of interest and principal. Similar to S&P, it assigns credit ratings based on a scale.

DBRS uses the following ratings schedule for bond and long term debt:

AAA Highest Credit Quality
AA Superior Credit Quality
A Satisfactory Credit Quality
BBB Adequate Credit Quality
BB Speculative
B Highly Speculative
CCC Very Highly Speculative
CC Extremely Speculative
C Extremely Speculative
D In default of principal, interest or both

Doomsday Call
See Canada Call
A reduced credit rating on a company's debt issued by a credit rating agency.
Duration is a measurement that allows an investor to compare bonds for potential price volatility by considering both the term and the coupon together. It is defined as the average time that it would take to receive all cash flows in terms of current dollars. Both coupon payments and principal are factored into the calculation.

Bonds with longer terms are more volatile than shorter term bonds because cash flows are received over a longer period of time, and therefore are subject to a greater deal of uncertainty. Similarly, market prices of higher coupon bonds are less volatile than a lower coupon bond because a greater proportion of the bond's total return is realized with the semi-annual payments than at maturity.

Emerging Market
A financial market of a developing country, usually a small market with a short operating history.
A bond with a specific maturity date, but granting either the issuer or the holder, the option to extend the maturity date by a prescribed number of years.
Face Amount/Face Value
It is almost always the value of a bond at maturity. It is also called par. Face value is no indication of market value.
Federal Reserve
The United States' equivalent of the Bank of Canada. It is comprised of 12 central banks. Among other roles, this widely watched institution implements monetary policy in the U.S. by setting the Federal funds rates and Discount Rates.
An offer status which has a high probability of execution. The order can still be rejected by the contributor based on a change in the order criteria. An example would include the inventory level changed after an order was submitted but prior to being received by the contributor. This status is placed on most offerings during market hours.
First Call Date
The right of the bond issuer to redeem the bonds before its maturity date is usually accompanied by a schedule of call dates and prices at which the bond can be called on each corresponding call date. The earliest of which is the "first call date".
First Settlement
The first possible settlement date on a newly issued security.
Fiscal Policy
The government’s use of spending and taxes to influence the overall level of economic activity
Callable bonds issued by Canadian chartered banks. As the name suggests, the coupon is rate is set for the term that precedes a call date and then floats thereafter. After the call date, the floating rate would be determined by adding a pre-specified number of basis points to a prevailing Bankers' Acceptance rate. The bond market generally anticipate that fixed floaters will be called on the first call date. Hence their yield is always cited to the near - or call date - rather than the long - or maturity - date.
Fixed Income Securities
Investments such as bonds, mortgage-backed securities, and money market instruments (e.g. Treasury Bills) that provide investors with a predictable income and relative safety of principal.
A bond that is trading without accrued interest.
A fixed income security sold with a variable coupon.
Foreign Pay Bonds
These comprise bonds denominated in currencies other than Canadian dollars. They include U.S. dollar bonds issued by the U.S. government, domestic corporations or foreign issues. There are also a variety of "Euro" bonds denominated in currencies of European nations (including the Euro itself).
Government Bonds
Bonds issued by governments (federal or provincial), crown corporations, or government agencies. Backed by the taxation powers of governments, these bonds typically have the highest credit ratings.
Guaranteed Investment Certificate (GIC)
An investment instrument commonly available from trust companies or banks requiring a minimum investment for a pre-determined time period at a specified rate. Most are non-redeemable prior to maturity but there are exceptions. For example, most TD Mortgage GICs can be sold prior to maturity at prevailing market rates. GICs usually range in terms from 1 to 5 years. Those with terms to maturity of less than one year are usually referred to as term deposits.
High Yield Bonds
Also called non-investment grade bonds or "junk bonds". These bonds are usually rated lower than BBB and are considered speculative compared to investment grade bonds. The higher yields are commensurate with the higher risk perceived by the market.
A security that contains characteristics of both bonds and preferred shares. Hybrids can be structured like bonds (i.e. trading units of 1000 and semi-annual interest payments). Usually hybrids rank between the most junior debt and highest ranking preferred shares in the priority of payment hierarchy. They frequently contain special call or exchange features.
Initial Offering Price
The cost of a bond in the primary market. Bond new issues are usually sold at par or a slight discount.
Compensation paid for the use of borrowed funds that is usually expressed as a percentage rate of principal.
Investment dealers' holdings of fixed income securities that are available for sale to investors. Inventories fluctuate from day to day and throughout a day as well.
Investment Grade
Bonds considered appropriate for risk-averse investors because they usually represent moderate to low risk. These bonds are usually rated in the top four categories (e.g. BBB or better) by a bond rating agency.
Issue Description
The description of a bond list name of issuer, coupon, maturity date, and title of the issue. To enter an issuer's name for a search, enter the first few letters of the issuer's name or enter the entire name.

An entity which issues and is obligated to pay principal and interest on securities.

Junior Debt
One or more bond issues for which collateral has been pledged for more senior issues. It therefore ranks behind these bonds in priority of payment.

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A fixed income investment strategy in which an investor will purchase issues with maturities staggered over several months, or more often, years. The principal objective is to mitigate reinvestment risk by avoiding a large maturity at a time when interest rates and yields are relatively low. It also serves to enhance liquidity in a portfolio by ensuring that funds made available by maturing bonds will satisfy cash requirements without the need to sell a position prior to maturity.
The ability of the market to absorb the pressures of buying and selling without substantially affecting the price of the fixed income instrument. A liquid market is characterized by active trading and tighter spreads. This is a very important characteristic of an issue. Liquidity is dependent on a variety of factors including the size of the issue, the term to maturity and how widely held an issue it is. Intuitively then, it is understandable that Government of Canada bonds are relatively liquid. An illiquid market is marred by low trading and price concessions on the part of a seller.
Bonds that are listed and traded through the facilities of a major exchange (e.g. the TSE). Listed bonds in Canada are predominantly convertible debentures or hybrids.
Long Term Bond
Generally refers to bonds that mature in more than 10 years.
Make Whole Call Only
When "make whole call" is displayed as part of the security description, the bond is redeemable at par plus a premium. The premium is based on the yield of the then current treasury.
Market Order
An order placed to be executed at the best available price.
Market Price
The price at which a bond trades to reflect current market conditions. Bonds can trade at par ($100.00), a discount (e.g. $99.200), or a premium (e.g. $104.70).
The fee charged by a dealer who purchases a security from a market maker and sells it to a customer at a higher price. The fee is included in the price of the bond.
Maturity Date
This is the date when the principal amount of the bond becomes due and payable.
Medium Term Bond
Generally refers to bonds that mature in 3 to 10 years.
Monetary Policy
Implemented by the Bank of Canada, it is policy using money supply and control of credit in the Canadian economy to control the general direction of interest rates and maintain the integrity of the Canadian dollar.

Tightening monetary policy is indicative of rising rates usually near the end of a phase of economic expansion. Conversely, loosening monetary policy is accompanied by decreasing rates that usually precedes economic expansion.

Money Market
The money market links investors who want to earn competitive rates on their money, with governments and corporations that need short term loans. Money market instruments include Treasury Bills (T-Bills), Bankers' Acceptances and Commercial Paper.
Mortgage-Backed Securities / MBS
Fixed rate debt instrument that represent an undivided interest in a pool of insured residential first mortgages. The Canadian Mortgage and Housing Corporation (CMHC), a federal crown corporation, insures these pools of mortgages, thus guaranteeing the timely payment of principal and interest due to certificate holders. They are ideal for conservative investors who require monthly income. The monthly income is in the form of interest and principal that is made to the mortgages. They trade in the bond market at prices reflecting current interest rates. MBS are identified primarily by an eight digit Pool Number.
Municipal Bonds
Fixed income securities issued by local governments.
Moody's Credit Rating
A designation given by Moody's to indicate the relative credit quality, or the strength of the ability to pay a fixed income instrument's obligation.
Net Amount
The total amount an investor pays for a bond including principal and accrued interest. For a seller, it is the total amount received including principal and accrued interest. It is also called the settlement amount.
Next Coupon
Next Coupon refers to the date of the next interest (coupon) payment arising from a fixed income security. See also Coupon. A search that specifies a next coupon date range will return fixed income instruments having any coupon payment within the date range specified.
New Issues
Bonds sold in the primary - as opposed to the secondary - market. They are bonds offered to the public for the first time. They are usually priced at par or a discount with relatively attractive yields. New Issue bonds may or may not be available depending upon market conditions.
TD Waterhouse Canada Inc.
is an active participant in the distribution of new issues.
Non Callable
A bond that cannot be called either for redemption by or at the option of the issuer before its specified maturity date.
An unsecured promise to pay (e.g. a promissory note such as Bankers' Acceptances).
This is the same as ask which is the lowest price a prospective seller will take for a security.
A commitment by a purchaser to buy or sell a stated number of bonds at the offered or bid price.
Over-the-Counter Market /OTC
Bond trading conducted outside the facilities of an exchange. Trades are done by way of telephone or computer. The Canadian bond market is almost exclusively an over-the-counter one. It is also called an unlisted market.
Overnight Position
The inventory a firm or trader holds at the end of the trading day.
Packages are usually synthetic combinations of stripped bonds. They are tailored to meet special needs of investors. For example, a package bond may trade like a strip (with no interest payments) until some predetermined point in the future. After that point, it will take on characteristics of normal bond (i.e. regular semi-annual interest payments). This type of package may suit a person with a self-directed RSP who intends to convert the plan into a RIF a few years down the road. Income is not generated from the package until it is required. These types of bonds tend to be more illiquid in nature and hence are intended to be buy and hold investments.
Par Value
The stated face value or principal amount of a bond which the issuer undertakes to pay back usually at maturity.
Parity Bonds
Two issues having the same priority of claim or lien against pledged revenues.
The amount by which a bond is priced over its par value. Whether or not, and the extent to which, a bond trades at a premium is dependent on its coupon, term to maturity, credit quality, and the general interest rate environment.
Premium Bond
A bond with a price above par value.
Premium Call
A provision for a bond allowing the issuer to call the bond prior to the maturity date at a price above the par value of the bond.
Present Value
The value today of a sum of money available in the future based on a certain interest rate. The determination of present value enables an investor to determine the amount of money to be invested in order to receive a specified amount in the future.
A pricing method by which the bond is traded at the dollar price specified. The price is per $100.00 face, or principal amount, of a bond. For example, buying 1 bond (1000 face) at $95.50 represents paying $955.00 for that $1000 face value.
Primary Market
The market for new issues of securities. After bonds are traded here, they are then traded on the secondary market.
Prime Rate
The lowest interest rate charged by Canadian commercial banks to their best, most creditworthy, customers.
Principal Trade
An investment firm is acting as a principal when it is on the other side of a transaction with a client. For example, when an investor buys a bond out of a dealer's inventory, the firm is acting as a principal. Because the Canadian bond market is predominantly an over-the-counter market, most bond trades are principal trades. A firm acts on an agency basis when it facilitates trades between third party buyers and sellers. This is commonly the case with exchange-traded debentures.
Private Placement
A new bond issue sold to a small number of institutions. Regulations are usually not as onerous on the issuers of private placements.
The money received by a bond issuer at the close of the sell.
A legal document that describes securities being offered for sale to the public. It is prepared in conformity with the requirements of applicable securities regulators.
Protective Covenants
The agreements imposing obligations on the bond issuer to protect the bondholders. Requirements may include segregation of funds or adequate debt service coverage among others.
This is the province or territory in which the bond was issued. To choose the province, select from the drop-down list by clicking on the down arrow and highlight the desired province or territory.
Provisional Rating
A temporary credit rating of an issuer by a credit rating agency. The provisional rating is revised when the agency receives complete financial information on the issuer.
Put Bond
A bond that is redeemable at the option of the holder or upon certain circumstances. This is not a common feature in the Canadian marketplace.
Quantity of Bonds
The number of bonds. For example, 10 bonds is equivalent to $10,000 face value.
Rate of Return
The yield-to-maturity. Most bond are calculated and stated as a semi-annual percentage.
The credit rating of a fixed income security provided by an independent rating agency.
Real Return Bonds
These are long-term bonds issued by the Government of Canada that offer investors a real rate of return (i.e. adjusted for inflation). The principal, and consequently the interest payments, are linked to the Consumer Price Index. These bonds are traded on the secondary market.
The retirement of bonds by an issuer who repays the face value or call price to the holders. Occasionally, redemption may be at the option of the holder (e.g. Canada Savings Bonds). These bonds are sold in varying denominations usually as low as $100.00.
Registered Bond
A bond which is registered under in a specific name with the issuing corporation or government. Such a bond may only be cashed by the person(s) it is registered to.
A feature of a bond which grants either the issuer or the holder the option, under specified conditions, to redeem the security on a prescribed date before maturity.
S&P Credit Ratings
A Standard & Poor's issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The issue credit rating is not a recommendation to purchase, sell, or hold a financial obligation, inasmuch as it does not comment as to market price or suitability for a particular investor.
Savings Bonds
Bonds issued by the Government of Canada or provincial governments. The bonds are designed for individual investors.
Secondary Market
The market after the new issue stage, or primary market, in which an investor purchases a bond from someone other than the issuer of the bond at prevailing prices.
Secured Obligation
A debt backed by physical assets. Repayment of interest and principal can be provided by these assets in case of default.
The act of packaging loans of different types into pools and then selling shares of these pools in the form of marketable securities.
Security Types
Security types refers to different categories and subtypes of fixed income securities. These categories include

Within the fixed income centre, these security categories are often displayed in abbreviated format, as per the chart below.

Abbreviation Security Category
T Canadas / Agencies and Treasury Bills
M Municipals
C Corporates, Bankers Acceptances, Commercial Paper
L Provincials

Specific security subtypes are also often displayed in abbreviated format, as per the chart below.

Abbreviation Security Subtype Description
AMR Amortized Notes
BA Bankers Acceptance (Short Term)
BAR 1 Month Bankers Acceptance Futures
BAX 3 Month Bankers Acceptance Futures
BDN Bearer Deposit Note
BEO Bond Embedded Option
BND Bond
BWT Bond Warrant
CGB Canadian Government Bond Future - 10 year
CGF Canadian Government Bond Future - 5 year
CGR Cougar
CP Commercial Paper
CPN Strip Coupon
CWT Bond Cum Warrant
DSC Discount
ECN Extendible Commercial Paper Interest-Bearing Note
ECP Extendible Commercial Paper
ED Eurodollar Futures
EUB Eurobond
FV USA Treasury Note Future - 5 year
GIC Investment Certificate
IBA Interest-Bearing Bankers Acceptance
IBN Short Term Interest Bearing Note
MBA Bankers Acceptance (Medium Term)
MBS Mortgage Backed Security
PIK Pay-in-kind coupon bond
PKG Packages
PN Promissory Note
RES Strip Bond (Residual)
RP1 Residual Payment Unit 1
RP2 Residual Payment Unit 2
RRB Real Return Bond
SNT Sentinel
TB Treasury Bill
TGR Tiger
TW USA Treasury Note Future - 2 year
TY USA Treasury Note Future - 10 year
US USA Government Bond Future - 30 year
XWT Bond ex Warrant
ZBN Zero Bond

Senior Debt
A senior debt issue ranks ahead of other bonds in terms of claims of assets in the event of default or company dissolution.
Serial Bond
A bond issue with specific amounts of principal maturing each year.
Settlement Periods
The date on which a fixed income buyer must pay for the cost of the security plus any accrued interest. In Canada, all money market instruments settle the same day as the transaction. U.S. treasury bonds and bills settle the next business day. Short term bonds (maturing in three years or less) settle in two business days.

Most other issues settle three business days after the transaction date.

Sinking Fund
A fund set up by an issuer to retire a portion of a bond prior to maturity. This reduces the burden on issuers at maturity.
A price spread is the difference between the bid and offer prices for a specific fixed income security.

A credit spread is the difference in yield between a benchmark (e.g. a Government of Canada) and the bond of another issuer. The credit spread is normally cited in terms of basis points. The riskier the issue as perceived by the market, the greater the credit spread will be.

Stripped Bonds
Bonds in which the coupons have been detached from the principal. The principal (commonly referred to as the residual) and the coupons trade separately. They will trade at discounts and mature at par. The maturity dates of coupons will be the scheduled interest payment date; for residuals, it will be the originally established maturity date. The longer the term to maturity, the greater the discount will be. Interest is not paid to the holder but accretes in the value of the bond as maturity approaches. Strips have special tax consequences when bought outside of a registered account. Because no interest is received throughout the duration of the bond, they tend to be more volatile than interest bearing bonds. Strips are well suited to such long-term goals as education planning and retirement savings. Strips are sometimes referred to as zeros.
An offering status that has a lower probability of execution as the price and quantity are indicative only. This status is usually placed on an offer after defined market hours or in a fast moving market.
The act of selling one fixed income security and purchasing another. Investors may switch bonds when they perceive some benefit in doing so. Possible motives of bond switching include: net yield improvement, term extension or reduction, improvement in credit quality, and cash take-outs.
The length of time to maturity.
Treasury Bills
These are commonly called T-Bills. It is a short-term money market instrument issued by the federal government to meet near term borrowing needs. Provincial T-Bills are less common. T-Bills are sold at a discount and mature at par. The difference between the cost and maturity value represents the purchaser's income in lieu of interest. Like other money market instruments, T-Bills can typically be purchased with terms of 30 days, 60 days, 90 days, six months and one year. They are well suited to very conservative investors who opt to obtain higher rates than cash offers for a short period of time.
Trade Date
The date on which a bond transaction occurs. Payment for the transaction will occur on the Settlement Date.
Treasuries / Treasury Bonds
This term is often used when referring to bonds issued by the Canadian government or U.S. federal government. See also Canadas.
It is generally a trust company appointed by an issuer to ensure that all the terms of a bond's trust deed or covenant are maintained.
An improved credit rating on a company's debt issued by a credit rating agency.

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Worst Yield
A yield calculation based on the minimum trade amount. Typically, wholesale transactions will be bought at a lower price and therefore offer a better yield.

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Yankee Bonds
Bonds issued by a domestic corporation, Canadian Province or Federal Government in U.S. currency. These bonds are subject to foreign exchange fluctuations when interest or principal is paid out to an RSP account since it is converted to Canadian dollars.
This is the basis on which a fixed income investment is priced and sold. It reflects the value of the bond giving consideration to the term to maturity, credit quality of the issuer/guarantor, specific term of the issue, and general market conditions.
Yield Curve
A graphic representation of the relationship among yields of bonds with similar credit qualities but different maturities. A normal yield curve is upward sloping and is explained by the hypothesis of term risk. That is, because uncertainty increases with longer terms to maturity, yields will increase as well to compensate holders for the perceived greater risk. Occasionally a yield curve may be flat or inverted.

(An inverted curve is marked by higher yields at the short end of the spectrum. They decrease as term increases).

Yield to Call
Yield to call is computed in the same manner as yield to maturity, except the maturity date is replaced by the call date and the redemption value at maturity is replaced by the call price.
Yield to Maturity
It is the rate of return on an investment in a fixed income security taking into account the total of annual interest payments, the purchase price, the redemption value, and the time remaining until maturity. It is based on the assumptions that the security is held by the investor until final maturity and that all interest received can be reinvested at the yield to maturity.
See Stripped Bonds.
Accrued interest
The accumulated interest paid to a seller of a bond by the buyer (unless the bond is in default). The buyer of a fixed-income security must pay the seller of the security to compensate the seller for holding the security between the last coupon date and the settlement date.
All or none order (AON)
A limited price order that is to be executed in its entirety or not at all (no partial transaction). AON orders are not shown on the specialist's book because they cannot be traded in pieces. Therefore, they will not show on the Bid or Ask.
American Depository Receipt (ADR)
A security created by a U.S. bank that evidences ownership to a specified number of shares of a foreign security held in a depository in the issuing company's country of domicile. The certificate, transfer and settlement practices for ADRs are identical to those for U.S. securities. U.S. investors often prefer ADRs to direct purchase of foreign shares because of the ready availability of price information, lower transaction costs and timely dividend distribution.
American-style option
An option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American style.
American Stock Exchange
AMEX Composite Index
The American Stock Exchange introduced the AMEX Composite Index with a new ticker symbol, XAX, on January 2, 1997. The XAX is a market capitalization-weighted, price appreciation index, and replaces the AMEX Market Value Index (XAM) which, since its inception, has been calculated on a total return basis to include the reinvestment of dividends paid by AMEX companies. The AMEX Composite Index is more comparable with other major indices, which reflect only the price appreciation of their respective components.
Annual report
The formal report on a company's finances and operations sent to all owners of shares in the company. It discloses the company's business activity during the year.
A type of investment contract that pays you regular income, usually after retirement.
Money that was not paid when it was due, and which is still owing. Most commonly referred to in the context of dividends.
The price at which someone who owns a security offers to sell it; also known as the asked price.
Everything you, or a company, owns or are owed. Any possessions that have value.
The receipt of an exercise notice by an options writer that requires him to sell (in the case of a call) or purchase (in the case of a put) the underlying security at the specified strike price.
An option is at-the-money if the strike price of the option is equal to the market price of the underlying security. For example, if xyz stock is trading at $54, then the xyz 54 option is at the money.
Averages and Indices
Statistics that are used to measure the state of the stock market or the economy. They are based on the performance of selected stocks or other indicators, such as the Dow Jones Industrial Average and the TSE 300 Composite Index.
Average Maturity
The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater impact on funds with longer average life.
Bank rate
The minimum interest rate the Bank of Canada charges when it makes short-term loans to banks and other financial institutions. Since 1980, the Bank Rate has been set at 0.25% of 1% (25 basis points) above the weekly average tender rate of 91-day Government of Canada Treasury Bills.
Basis point
One-hundredth of a percentage point (0.01%).
Someone who expects that the market in general, or the price of a specific investment, will go down.
Bear market
A weak market where prices are falling.
Bearer security
Any investment which does not have the owner's name listed on it or in the records of the company that issued it. A bearer security may be sold or cashed in by the person who holds it.
The person (or in some cases the estate) named to receive the value of an insurance policy, trusteed account or investment account.
The money an insurance company pays when you make a claim for something covered by an insurance policy.
Measure of a stock's risk in relation to the market. 0.7 means a stock price is likely to move up or down 70% of the market change; 1.3 means the stock is likely to move up or down 30% more than the market
The price a prospective buyer is prepared to pay at a particular time for trading a unit of a given security.
A rise in a security's price above a resistance level (commonly its previous high price) or drop below a level of support (commonly the former lowest price.) A breakout is taken to signify a continuing move in the same direction. Can be used by technical analysts as a buy or sell indication.
Bid and ask quotations
Bid is the highest price a buyer will pay for a share or other type of investment. Ask is the lowest price the person selling the share will accept. Together they are referred to as a quotation or quote.
Blue chip
A leading, well-known company's stock from which you could expect consistent growth and dividend payments over the long term.
Board lot
A standard trading amount, usually 100 shares, which has been agreed upon by stock exchanges.
A certificate you receive for a loan you make to a company or government. In return, the issuer of the bond promises to pay you interest at a set rate and to repay the loan on a set date.
Book value
For an individual investor, book value is the amount you originally invested plus any interest or dividends you earned that have been reinvested.
Someone who expects that the market in general, or the price of a particular investment, will go up.
Bull market
A strong market where values are rising.
Business day
Any day when most businesses and government offices are open for business. A calendar day is any day of the year.
Buy on stop order
A buy order not to be executed until the market price rises to a definite price. Once the security has traded at least one board lot at that price, the order is then treated as a market order.
An investment, such as a bond, that can be 'called in' and repaid by the company or government that issued it, before it would normally be due. You are generally paid extra interest if your investment is called in early.
Call option
An option contract that gives its holder the right (but not the obligation) to purchase a specified number of shares of the underlying stock at the given strike price, on or before the expiration date of the contract.
Canadian Investor Protection Fund (CIPF)
The Fund covers client's losses of securities and cash balances. A limit has been placed by CIPF on the coverage provided for a customer's general accounts equal to $1,000,000 for losses related to securities and cash balances. Separate accounts of customers are each entitled to the maximum coverage of $1,000,000 unless they are combined with other separate accounts. For more information, please see the CIPF Web site or call 416-866-8366.
Capital gain or loss
The profit or loss you make when you sell an investment. Tax consequences may result.
The document showing that you own a bond, stock, or other investment.
Certified Financial Planner
See Canadian Investor Protection Fund.
The fee you pay for buying or selling investments.
Common share
An investment that gives you part ownership of a company and allows you to vote on major decisions affecting the company.
Compound interest
Interest paid on your initial investment, and then also on the interest as it builds up. Over a period of several years, compounding can have a dramatic effect in making your investment grow.
A printed notice sent to you to confirm you have bought or sold an investment.
A type of investment, usually a bond, debenture or preferred share, which you may exchange for common shares usually of the same company, at a set price and usually by a set date. The company may force you to exchange if the price of its common shares goes above the value of your preferred shares.
A legal entity that is separate and distinct from its owners. A corporation is allowed to own assets, incur liabilities, and sell securities, among other things.
This is the portion of the bond that provides the holder an interest payment at a pre-determined rate. Coupons are the amount of interest that will be paid on annual basis. Most bonds, however, pay interest semi-annually.
Canadian Securities Course
Cum dividend
When you buy a share cum dividend it means you will receive an upcoming dividend that has already been announced. If you are not eligible to receive the dividend, the share is said to be ex dividend.
Cyclical share
A share which is particularly sensitive to changes in economic conditions.
Day order
The request from a customer to either buy or sell a security, that, if not cancelled or executed the day it is placed, expires automatically at the end of the trading day. All orders are day orders unless otherwise specified.
Another name for a bond. With a debenture, your money is secured by the credit of the company or government issuing it, rather than by specific assets.
Money that has been borrowed and must be repaid, usually with interest and by a set date.
A term used when a person or company breaks the terms of an agreement.
A financial security such as an option whose value is derived in part from the value and characteristics of another security, the underlying asset.
A person elected by the holders of common shares at an annual meeting to direct a company's policies.
Discount to par
The amount by which a preferred share or bond is sold below its face value. The buyer then receives face value at maturity.
The market price of a share is said to have been 'discounted' when an event that is expected to happen, such as an increase in dividends or lower earnings, has been reflected in its price.
The practice of buying several different types of investments over a broad range of industries, sectors and companies in order to reduce your risk if one particular industry, sector or investment performs poorly.
The part of a company's profits that you may receive if you are a shareholder of the company. Preferred shares earn a set dividend, while the dividends for common shares vary with the company's profits. Companies are under no legal obligation to pay dividends to their shareholders.
Dollar cost averaging
Investing a set amount in a specific investment at regular intervals. As a result, when the value of the investment goes down, you're buying more of it, and when it rises, you're buying less. The overall effect reduces the average cost of your investment.
Dow Jones Industrial Average - (DJIA)
The DJIA is a price-weighted average of 30 actively traded blue chip stocks, primarily industrials but including American Express Co. and American Telephone and Telegraph Co. Prepared and published by Dow Jones & Co., it is the oldest and most widely quoted of all the market indicators. The components, which change from time to time, represent between 15% and 20% of the market value of NYSE stocks. The DJIA is calculated by adding the closing prices of the component stocks and using a divisor that is adjusted for splits and stock dividends equal to 10% or more of the market value of an issue as well as substitutions and mergers. The average is quoted in points, not in dollars.
Earnings Per Share (EPS)
Also referred to as Primary Earnings Per Share. Net income for the past 12 months divided by the number of common shares outstanding, as reported by a company. The company often uses a weighted average of shares outstanding over reporting term.
Electronic Data Gathering, Analysis, and Retrieval -EDGAR
An electronic system implemented by the SEC that is used by companies to transmit all documents required to be filed with the SEC in relation to corporate offerings and ongoing disclosure obligations. EDGAR became fully operational in 1995.
Ending Net Asset Value
The market value of a fund share on a predetermined end date.
Net assets at time of death.
Estate Planning
The total process of planning an estate, including: (a) creating and conserving an estate; (b) minimizing its shrinkage at death; (c) creating adequate liquidity for settling the estate; and (d) developing a proper plan for distributing the estate to the owner's heirs.
European-style option
An option contract that can be exercised only on the expiration date.
Interval between the announcement and the payment of the next dividend.
Ex-dividend date
The date on or after which a security begins trading without the dividend (cash or stock) included in the contract price.
The process of completing an order to buy or sell securities. Once a trade is executed, it is reported by a Confirmation Report; settlement (payment and transfer of ownership) occurs in three business days after an order is executed.
Executor / Estate Trustee
A person or corporation (i.e. Trust company) nominated in a will to effect the settlement of the testator's estate in accordance with the terms of the will.
To implement the right of the holder of an option to buy (in the case of a call) or sell (in the case of a put) the underlying security.
Expiration date
The last day (in the case of American-style) or the only day (in the case of European-style) on which an option may be exercised. For stock options, this date is the Saturday immediately following the third Friday of the expiration month; brokerage firms may set an earlier deadline for notification of an option holder's intention to exercise. If Friday is a holiday, the last trading day will be the preceding Thursday.
Face value
The value of a bond or debenture that is printed on the face of the certificate. Face value is usually the amount the issuer will pay at a certain date. Face value is no indication of market value.
Family of Funds
Group of mutual funds managed by the same investment management company. Each fund typically has a different objective; one may be a growth-oriented stock fund, whereas another may be a bond fund or money market fund. Shareholders in one of the funds can usually switch their money into any of the family's other funds, sometimes at no charge. Family of funds with no sales charges are called no load families. Those with sales charges are called load families.
Fixed income securities
Investments such as bonds, debentures and mortgage-backed securities that provide you with a regular income.
A financial planner (FP) can help clients evaluate the investing and financing options available to them.
Gold - GOX
The CBOE Gold Index - (GOX) is an equal-dollar-weighted index composed of 10 companies involved primarily in gold mining and production. The index is re-balanced after the close of business on expiration Friday on the March quarterly cycle.
Good Till cancelled order (GTC)
An order to buy or sell stock that is good until you execute or cancel it. Brokerages might set a limit of 30 days, at which the G.T.C. order expires if not restated.
Growth shares
Common shares of a company that have excellent prospects for above-average growth. A company which over a period of time seems destined for above average expansion.
GTC order
Good until canceled order. An order you give your Investment Advisor to buy or sell an investment, usually at a certain price, that remains in effect until it is filled (usually for a period of one month) or until you cancel it.
Guaranteed Investment Certificate (GIC)
An investment where your money (usually at least $1,000) is deposited at a set rate of interest, for a fixed period of time. Generally you can not take your money out early, but there are exceptions.
An investment strategy used to reduce risk by locking in the price to protect against future price changes.
A situation where a security is temporarily not available for trading (e.g. Market Makers are not allowed to display quotes).
Investment Advisor
Income shares
Shares that pay you higher than usual, regular dividends.
Inside Market
The highest bid and the lowest offer prices among all competing Market Makers in a NASDAQ security, i.e., the best bid and offer prices.
See Averages and Indices.
A put option that has a strike price higher than the underlying stock price, or a call option with a strike price lower than the underlying stock price. For example, if xyz stock is trading at $54, then the xyz 50 call option would be considered in the money by $4.
Anyone with access to material information about a company that is not publicly available, including the company's directors and senior officers. Also, anyone owning more than 10% of the voting shares.
Money you pay for the use of someone else's money.
The creation of more money through the use of capital.
Investment company or fund
A company that invests in other companies. There are two types: closed-end funds and open-end or mutual funds.
Closed-end funds have a fixed number of shares which are traded on the stock exchange.
Open-end or mutual funds continually issue more shares as people want them.

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Lagging indicators
Economic indicators, such as the unemployment rate and business spending, that have a delayed reaction to the overall pace of the economy. For example, if consumer spending increases, there will be a delay before manufacturers hire more workers and the unemployment rate begins to fall.
Last Sale Reporting
An electronic entry by NASD Members to The NASDAQ Stock Market of the price and the number of shares involved in a transaction in a NASDAQ security. The trade reported must be submitted to NASDAQ within 90 seconds of the execution of the trade.
Leading indicators
Economic indicators, such as housing starts and stock prices, that signal coming trends in the economy as a whole.
Life insurance
An insurance policy that pays a set amount to those named in your policy when you die.
Limit Order
An order to buy a stock at or below a specified price, or to sell a stock at or above a specified price. For instance, you could tell a broker "buy me 100 shares of XYZ Corp at $8 or less" or "sell 100 shares of XYZ at $10 or better" The customer specifies a price, and the order can be executed only if the market reaches or betters that price.
Listed shares
Shares of publicly owned companies which are traded on a stock exchange.
The commission that is included in the price of most mutual funds. You pay either a front-end load when you buy units in the fund or a back-end load when you sell units.
Load Fund
Mutual Fund that is sold for a sales charge by a brokerage firm or other sales representative. Such funds may be stock, bond or commodity funds, with conservative or aggressive objectives.
Long Position
Occurs when an individual owns securities. For example an owner of 1000 shares of stock is said to be Long the Stock.
Major trend
The general price of an investment, ignoring temporary ups and downs.
Management expense ratio (MER)
The management expense ratio is the management fee plus the operating expenses of a mutual fund, expressed as a percentage of the average net asset value of the fund during the year.
Allows investors to buy securities by borrowing money from a broker. The margin is the difference between the market value of a stock and the loan a broker makes.
Margin Account
A leverageable account in which stocks can be purchased for a combination of cash and a loan. The loan in the margin account is collateralized by the stock and, if the value of the stock drops sufficiently, the owner will be asked either to put in more cash, or sell a portion of the stock. Margin rules are federally regulated, but margin requirements and interest may vary among broker/dealers.
Market Close Date
Date on which the closing Net Asset Value (NAV) was last calculated.
Market Makers
The member firms that use their own capital, research, retail and/or systems resources to represent a stock and compete with each other to buy and sell the stocks they represent. There are over 500 member firms that act as NASDAQ Market Makers. One of the major differences between The NASDAQ Stock Market and other major markets in the U.S. is NASDAQ's structure of competing Market Makers. Each Market Maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the Market Maker will immediately purchase for or sell from its own inventory, or seek the other side of the trade until it is executed, often in a matter of seconds.
Market Maker Spread
The difference between the price at which a Market Maker is willing to buy a security and the price at which the firm is willing to sell it i.e., the difference between a Market Maker's bid and ask for a given security. Since each Market Maker positions itself either to buy or sell inventory at any given time, each individual Market Maker spread is not indicative of the market as a whole. (See also Inside Market.)
Market Order
An order to buy or sell a stated amount of a security at the most advantageous price obtainable after the order is represented in the trading crowd. You cannot specify special restrictions such as all or none (AON) or good till cancelled order (GTC) on market orders.
Market price
The most recent price at which an investment has been bought or sold, for every trade there is a buyer and a seller.
Market Value
The market price; the price at which buyers and sellers trade similar items in an open marketplace. The current market price of a security as indicated by the latest trade recorded.
Maturity Date
The date on which the principal amount of a bond is to be paid in full.
Material News
News released by a company that might reasonably be expected to affect the value of a company's securities or influence investors' decisions. Material news includes information regarding corporate events of an unusual and non-recurring nature, news of tender offers, unusually good or bad earnings reports, and a stock split or stock dividend. (See also Trading Halt.)
See Management Expense Ratio.
Combining two or more companies by offering the stockholders of one company securities in another company in exchange for the surrender of their stock.
Mutual Fund Representative.
Money Market Fund
Open-ended mutual fund that invests in commercial paper, banker's acceptances, repurchase agreements, government securities, certificates of deposit and other highly liquid and safe securities, and pays money market rates of interest. The fund's net asset value remains a constant $1 a share; only the interest rate goes up or down.
Money market
The money market links investors who want to earn competitive rates on their money, with governments and companies that need short-term loans. Money market investments include short-term bonds and debentures, and treasury bills.
Mortgage-backed securities (MBS)
An investment that gives you a share of a pool of home mortgages. Mortgage-backed securities pay monthly income, which is a combination of interest and a portion of the principal of the underlying mortgages.
Most Active
Most active stocks.
Mutual Fund
Fund operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities or money market securities.
NASDAQ Composite Index - COMP
This Index measures all NASDAQ domestic and non-domestic based common stocks listed on The NASDAQ Stock Market. The Index is market-value weighted. This means that each company's security affects the Index in proportion to it's market value. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Today the NASDAQ Composite includes over 5,000 companies, more than most other stock market indexes. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indexes.
NASDAQ National Market Securities
They consist of over 3,000 companies that have a national or international shareholder base, have applied for listing, meet stringent financial requirements and agree to specific corporate governance standards. To list initially, companies are required to have significant net tangible assets or operating income, a minimum public float of 500,000 shares, at least 400 shareholders, and a bid price of at least $5. The NASDAQ National Market operates from 9:30 A.M. to 4:00 P.M. EST, with extended trading in SelectNet from 8:00 A.M. to 9:30 A.M. EST and from 4:00 P.M. and 5:15 P.M. EST.
NASDAQ SmallCap Market Securities
They consist of over 1,400 companies that want the sponsorship of Market Makers, have applied for listing and meet specific and financial requirements. Once a company is approved and listed on this market, Market Makers are able to quote and trade the company's securities through a sophisticated electronic trading and surveillance system. The NASDAQ SmallCap Market operates from 9:30 A.M. to 4:00 P.M. EST., with extended trading in SelectNet from 8:00 A.M. to 9:30 A.M. EST and from between 4:00 P.M. and 5:15 P.M. EST.
Nasdaq-100 Index
Includes 100 of the largest non-financial U.S. and non-U.S. companies listed on the NASDAQ National Market tier of The NASDAQ Stock Market. The Nasdaq-100 Index is a modified capitalization-weighted index, which is designed to limit domination of the Index by a few large stocks while generally retaining the capitalization ranking of companies. The index includes companies across major industry groups such as computer hardware and software, telecommunications, retail/wholesale trade and biotechnology.
National Association of Securities Dealers, Inc. (NASD)
The self-regulatory organization of the securities industry responsible for the regulation of The NASDAQ Stock Market and the over the counter markets. The NASD operates under the authority granted it by the 1938 Maloney Act Amendment to the Securities Exchange Act of 1934.
Net Asset Value (NAV)
The market value of a fund share, synonymous with a bid price. In the case of no-load funds, the NAV, market price, and offering price are all the same figure, which the public pays to buy shares; load fund market or offer prices are quoted after adding the sales charge to the net asset value. NAV is calculated by most funds after the close of the exchanges each day by taking the closing market value of all securities owned plus all other assets such as cash, subtracting all liabilities, then dividing the result (total net assets) by the total number of shares outstanding. The number of shares outstanding can vary each day depending on the number of purchases and redemptions.
Net asset value per unit
The net value of the securities held in a mutual fund, divided by the number of units in that fund.
Net Change
The difference between today's last trade and the previous day's last trade. The difference between today's closing Net Asset Value (NAV) and the previous day's closing Net Asset Value (NAV).
New Issue
Shares or bonds offered by a company for the first time.
New York Stock Exchange
NYSE Composite Index - (NYSE)
A market value-weighted index which relates all NYSE stocks to an aggregate market value as of Dec. 31, 1965, adjusted for capitalization changes. The base value of the index is $50 and point changes are expressed in dollars and cents.
No-Load Fund
Term used to describe a mutual fund that can generally be purchased or redeemed without a sales commission.
Odd lot
A number of shares which is less than a board lot.
Open Order
An order to buy or sell a security that remains in effect until either it is canceled by the customer or executed.
Gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a given date. Investors, not companies, issue options. Buyers of call options bet that a stock will be worth more than the price set by the option (the strike price), plus the price they pay for the option itself. Buyers of put options bet that the stock's price will drop below the price set by the option. An option is part of a class of securities called derivatives, which means these securities derive their value from the worth of an underlying investment.
Out-of-the-money option
A call option is out of the money if the strike price is greater than the market price of the underlying security. That is, you have the right to purchase a security at a price higher than the market price. A put option is out of the money if the strike price is lower than the market price of the underlying security.
Over-the-counter (OTC)
A decentralized market (as opposed to an exchange market) where geographically dispersed dealers are linked by telephones and computer screens. The market is for securities not listed on a stock or bond exchange. The NASDAQ market is an OTC market for U.S. stocks.
Par value
The face value of a bond or share as set by the company or government that issued it.
Paper profit
When the investments you hold are worth more than you paid for them. If you sell your investments for more than you paid for them, then you have a realized profit.
Penny stocks
Low-priced, generally risky shares selling at less than $3 per share.
Your collection of investments.
Preferred shares
A class of share that entitles you to receive a fixed dividend before the common shareholders receive a dividend, and to receive a set amount per share if the company fails. Preferred shareholders are usually not allowed to vote at the company's annual general meeting.
Premium - shares and bonds
The amount by which a preferred share, bond or debenture sells above its face value. In the case of a new issue of bonds or stocks, the amount the market price rises over the original selling price.
Premium - insurance
Payments you make for an insurance policy.
Price-earnings ratio
A common share's current market price, divided by the company's annual earnings per share.
Prime rate
The interest rate banks charge to their most credit-worthy customers.
When the firm buys from or sells to a client from the firm's own account, they are acting as principal. Principal also refers to the initial amount you invested, and the face value of a bond.
Selling an investment to take a profit. The process of converting paper profits into cash.
Program Trading
Trades based on signals from computer programs, usually entered directly from the trader's computer to the market's computer system and executed automatically.
A detailed description of investments being offered for sale.
Written authorization you give for someone else to vote in your place at a shareholders meeting.
Put option
This security gives investors the right to sell (or put) a fixed number of shares at a fixed price within a given period. An investor, for example, might wish to have the right to sell shares of a stock at a certain price by a certain time in order to protect, or hedge, an existing investment.
Put-call ratio
The ratio of the volume of put options traded to the volume of call options traded, which is used as an indicator of investor sentiment (bullish or bearish).

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A quick rise in the general price level of the market or in the price of an individual stock.
When your investments temporarily decrease in value after increasing for a long period of time.
Redemption price
The price you are paid if an investment you own is called in (redeemed) by the issuer early. Issuers generally must pay you a premium if they call an investment in early.
Registered tax deferral savings plans
Any savings plan where you do not pay tax on the money you put in, up to specified limits, or on any money you make from the investments. You only pay tax when you withdraw the money. Usually trusteed accounts. Examples include Registered Pension Plans, Registered Retirement Savings Plans (RSP), Registered Retirement Income Funds (RIF) and Registered Education Savings Plans (RESP).
Retained Earnings
Net profits kept to accumulate in a business after dividends are paid.
Return of Capital
A distribution of cash resulting from depreciation tax savings, the sale of a capital asset or of securities in a portfolio, or any other transaction unrelated to retained earnings. Usually distributed by Real Estate Investment Trusts.
Rights Offering
Issuance of "rights" to current shareholders allowing them to purchase additional shares, usually at a discount to market price, from the company within a specific time period. Rights generally trade on stock exchanges from the "ex-rights date" (two business days prior to the record date) until their expiry. The customary method of making an offering is to issue one right for each common share outstanding. From a company perspective, one of the prime benefits of a rights offering is the opportunity to raise capital.
Registered Representative
An investment where you either own part of a company (shares), or are lending a company or government money (bonds and debentures).
Sell on stop order
A sell order not to be executed until the market price drops to a definite price. Once the security has traded at least one board lot at that price, the order is then treated as a market order.
Settlement date
The date by which you must pay for an investment, or your certificate must be delivered to us. For most investment, this is the third business day after the date of the transaction.
Seven-Day Yield
Yield for seven-day period including the day reported.
Certificates or book entries representing ownership in a corporation or similar entity.
Share Repurchase
Program by which a corporation buys back its own shares in the open market. It usually is done when shares are undervalued. Since it reduces the number of shares outstanding and thus increases earnings per share, it tends to elevate the market value of the remaining shares held by stockholders.
Short sale
The practice of selling a security before you own it, in the hope that the price will have decreased by the time you buy it back. The firm will attempt to borrow the security for you, so you can sell it. For example: assuming the firm can borrow the shares, you sell a share short at $ 50.00, and if the market price declines, buy it later at $ 40.00. You've made a profit of $10.00 on the transaction. It is illegal for a seller not to declare a short sale at the time of placing an order.
Short Interest
The total number of shares of a security that have been sold short (see "Short Selling") by customers and securities firms.
Short Selling
Short selling is the selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short selling is a legitimate trading strategy. Short sellers assume the risk that they will be able to buy the stock at a more favorable price than the price at which they sold short. The NASDAQ Short Sale Rule prohibits NASD members from selling a NASDAQ National Market stock at or below the inside best bid when that price is lower than the previous inside best bid in that stock.
Short-Term Gain
The gain realized from the sale of securities or other capital assets held 18 months or less.
On an exchange, the member firm that is designated as the market maker (or dealer for a listed common stock). Member of a stock exchange who maintains a "fair and orderly market" in one or more securities. Only one specialist can be designated for a given stock, but dealers may be specialists for several stocks. In contrast, there can be multiple market makers in the OTC market. Major functions include executing limit orders on behalf of other exchange members for a portion of the floor broker's commission, and buying or selling for the specialist's own account to counteract temporary imbalances in supply and demand and thus prevent wide swings in stock prices.
Specialist's book
Chronological record maintained by a specialist that includes the specialist's own inventory of securities, market orders to sell short, and limit orders and stop orders that other stock exchange members have placed with the specialist.
One who attempts to anticipate price changes, tolerates risk and aims to make a profit over the short term.
The division of a company's outstanding common shares into a larger number of common shares. For example, in a two-for-one split, a shareholder with 100 shares valued at $50 each would exchange them for 200 shares at $25 each. Since this is done with all shares, each shareholder's equity in the company remains the same.
The spread for a company's stock is influenced by a number of factors, including:
  • Supply or "float" - the total number of shares outstanding available to trade.
  • Demand or interest in a stock.
  • Total trading activity in the stock.
Standard and Poor's 500 -(SPX)
This index is more formally known as the S&P 500 Composite Stock Price Index, is a European-style, capitalization-weighted index (shares outstanding multiplied by stock price) of 500 stocks that are traded on the New York Stock Exchange, American Stock Exchange and NASDAQ National Market®. The advantage of "cap-weighting" is that each company's influence on index performance is directly proportional to its relative market value. It is this characteristic that makes the S&P 500 such a valuable tool for measuring the performance of actual portfolios.
Stock Dividend
Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividends are not taxed until sold.
Stop Limit Order
A stop order that designates a price limit. Unlike the stop order, which becomes a market order once the stop is reached, the stop-limit order becomes a limit order when a definite price is reached.
Stop order (or stop)
An order to buy or sell at the market when a definite price is reached. The definite price must be either above (on a buy) or below (on a sell) the price that prevailed when the order was given.
Strike price
The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract.
Strip bonds
Bonds where the interest coupons have been detached from the principal. The principal and coupons trade separately, at a substantial discount. They are usually high quality federal or provincial government bonds.
Usually three letters used to identify a security or four on the Nasdaq.
See Treasury bills.
Term Life Insurance
A life insurance policy which is in effect only for a set period of time.
Today's High
The inter-day high trading price.
Today's Low
The inter-day low trading price.
A verbal (or electronic) transaction involving one party buying a security from another party. Once a trade is consummated, it is considered "done" or final. Settlement occurs one to three business days later.
Trade Date
The date on which a trade occurs. Trades generally settle (are paid for) one to three business days after a trade date. With stocks, settlement is generally three business days after the trade.
Treasury Bills
A certificate you receive for a short-term loan you make to the government. You buy it at a price below its face value and then receive face value when it matures. The difference is the interest you have earned on your money.
Treasury Bond 30 Year - (TYX)
This indicator is based on 10 times the yield-to-maturity on the most recently auctioned 30-year Treasury bond.
Trading Halt
The temporary suspension of trading in a security by an exchange, usually while material news from the issuer is being disseminated to the public. A security can also be halted in order to correct an imbalance of buy/sell orders. A trading halt gives all investors an opportunity to evaluate news prior to making an investment decision.
Triple Witching
the four times during the year when stock options, stock index options, and stock index futures simultaneously expire.
What supports the security or instrument that parties agree to exchange in a derivative contract.
Universal Life Policy
A life insurance policy in which a portion of your premiums are invested, earning you interest or investment income that is not taxable until you withdraw it. Usually, you can vary the amount and timing of premium payments and change the amount of insurance.
Valuation day
The day on which the net asset value per unit of a mutual fund is calculated.
A measure of risk based on the standard deviation of the asset return. Volatility is a variable that appears in option pricing formulas, where it denotes the volatility of the underlying asset return from now to the expiration of the option.
Total volume in each stock reported to The NASDAQ Stock Market from NASD members and exchanges trading NASDAQ securities between the hours of 8:00 A.M. and 5:15 P.M. EST.
A security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market. This "warrant" is then traded as a security, the price of which reflects the value of the underlying stock. Warrants are usually issued as a "sweetener" bundled with another class of security to enhance the marketability of the latter.
Whole Life Insurance
An insurance policy in effect for your entire lifetime, usually with level premiums throughout. These policies generally begin building up a cash value after two years.
A legal document, signed by you, appointing a person or persons to carry out the terms of your will and setting out how your estate is to be distributed.

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In general, a return on an investor's capital investment. For bonds, the coupon rate of interest divided by the purchase price, called current yield. Also, the rate of return on a bond, taking into account the total of annual interest payments, the purchase price, the redemption value and the amount of time remaining until maturity.

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Interest that is due on a bond or other fixed income security since the last interest payment was made. This often occurs for bonds purchased on the secondary market, since bonds usually pay interest every six months, but the interest is accrued by the bondholders every day. When a bond is sold, the buyer pays the seller the market price plus the accrued interest. The buyer will receive the full interest payment at the next pay date.
A dividend that is due, but not yet paid, to a preferred shareholder.
The amount of securities assigned to each of the participants in a new issue syndicate.
For clients buying new issues, best efforts are made to fill a client's order based on the actual number of shares available from the brokerage firm. Share allocations may also be set by the issuer so that a maximum number of clients can participate in the issue.
In securities underwriting, this is a firm commitment by an underwriter or underwriting group to purchase an entire issue outright from the issuing company. Typically, the underwriters put up a portion of their own capital and borrow the rest from a commercial bank. Then all members of the underwriting group resell the issue to the public at a pre-set price.
Yield is based on a similar pattern to that of a mortgage-backed security. The yield consists of an interest and a capital component. This is typically seen on investments such as trust units. The investment decreases over the life of the unit as the asset pool is used up. Upon maturity, the remaining assets are sold and paid out to the unit holders.
Shares representing an ownership interest in a corporation. Holders of Common Shares have the right to receive remaining property of the corporation upon dissolution, after all other claims are satisfied. They, therefore, assume the risk of the business failing and the potential gain, if the share value of the business increases. They also elect the board of directors that controls the company.
When a new issue is priced in the CONTEXT OF THE MARKET it means the exact price is not known during the marketing period. When the issue is priced, it will be priced according to the market price of the stock on a set date or range of dates. The exact price will be available the day after pricing occurs.
The date when expressions of interests for a new issue are officially processed by
TD Waterhouse
into clients' accounts. A trade confirmation is printed and sent to the client, along with a final prospectus (if applicable).
Corporate securities (usually preferred stock or bonds) that are exchangeable by the owner for a fixed number of shares of common stock at a stipulated price. Convertible securities are usually bought by investors who want higher income than available from common stock combined with greater potential appreciation than available from regular bonds.
The price at which convertible securities, such as bonds and preferred stock, can be converted into common stock at a set conversion ratio. For example, if the conversion ratio is 25 to 1, and you own a $1000 face value convertible bond, then the conversion price is $40 per share.
Using the above example, the value of 25 shares at the current price per share of $32.00. Since the bond has a higher face value, it is better not to convert.
The conversion ratio determines the number of shares of common stock for which a convertible security can be exchanged. The conversion ratio is determined upon issuance of the security and it's typically protected against dilution from stock splits, but not from secondary offerings. To determine conversion ratio, divide $1,000 par value by the conversion price.
Assessment of a corporation's credit history and ability to pay its obligations. There are two major credit agencies serving the Canadian marketplace: Standard and Poor's and Dominion Bond Rating Service.
Preferred Shares:
Preferred Shares:
Highest Quality: P-1
Good Quality: P-2
Medium Quality: P-3
Lower Quality: P-4
Poor Quality: P-5
Suspended Suspended

The term "suspended" indicates that the issuer is experiencing severe financial or operating difficulties of which the outcome is uncertain.

Preferred Shares:
Superior Credit Quality: Pfd-1
Satisfactory Credit Quality: Pfd-2
Adequate Credit Quality: Pfd-3
Speculative: Pfd-4
Highly Speculative: Pfd-5
In Arrears "D"

High and Low designations after a rating indicate the relative asset quality status of the fund within a rating category.

Highest Credit Quality: AAA
Superior Credit Quality: AA
Satisfactory: A
Adequate Credit Quality: BBB
Speculative: BB
Highly Speculative: B
Very Speculative: CCC
Extremely Speculative: CC
Extremely Speculative: C
In default of principal, interest, or both D

A provision requiring that unpaid accumulated dividends on preferred shares must be paid before dividends on any common shares.

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ETFs are similar to conventional mutual funds in that they provide investors with an affordable way to invest in a diversified basket of securities. But unlike conventional mutual funds, which can only be bought or sold at a price fixed at the end of each trading day, ETFs are listed on a stock exchange and can be traded throughout the day at changing market prices. In addition, you can buy ETFs on margin, as well as sell them short. ETFs also have a lower management expense ratio (MER) than conventional mutual funds and are more tax efficient because there is less buying and selling of the underlying portfolio.

An expression of interest is a FIRM order to purchase a specific number of shares in a New Issue. Once you place an Expression of Interest, you are obligated to purchase that number of shares of the new issues, if available.
A legal document describing securities being offered for sale to the public which is filed with the applicable provincial securities regulators in jurisdictions where the issue was sold and which supercedes the preliminary prospectus. It details material information about the corporation and the new issue and must be given to each first-time buyer of the new issue.
A tax incentive investment. The Canada Customs and Revenue Agency (CCRA) allows an individual investor to buy flow-through shares in Canadian exploration and mining companies and register an expense on their taxes for a "Canadian Exploration Expense (CEE)." This deduction can be at 100% of the investment or less, depending on the terms of the issue. Investors are entitled to deduct these expenses from all other income and then start at an adjusted cost base of zero or higher on the shares, depending on the investment. When the investors sell the shares, they take the difference between the sales price and the adjusted cost base as a capital gain (or loss) for tax purposes. Points to keep in mind with this type of issue:
  • Investors should invest only if they are comfortable with the underlying stock and not just because of the tax benefits
  • Shares may be issued at a premium to current market prices if they are not restricted from sale for a designated period
  • Shares may be issued at par with current market prices if the issuer is a junior issuer and the shares will be restricted

As this type of investment has tax considerations, clients should consult with their tax consultant or tax advisor before investing.

Example: An investor buys a flow-through share in XYZ Oil & Gas. The price is $10.00 and he/she is allowed a 100% write-off on taxes. The investor then sells it for $12.00 the next year. What would be the tax implication?

  1. Immediate tax deduction of $10.00 as CEE is deductible against current income (tax savings).
  2. Investor now has a $0.00 cost base.
  3. Realizes a gain of $12.00, taxed as capital gains.
Similar to an over-allotment option, this is a clause in an underwriting agreement that states that, if demand is high, additional shares may be authorized for distribution. These shares are distributed to selling group participants by the underwriters in the initial allotment, so brokers such as
TD Waterhouse
will have already received any additional shares prior to these announcements in the press.
High risk debt issued by companies with little or no collateral or liquidation value, little or no sales and earnings track records or by those with a questionable credit history. To compensate for this higher risk, the bonds are issued with a high coupon rate. They are usually issued by corporations without solid sales and earnings track records or by those with a questionable credit history. Also known as Junk Bonds.
Indicates a conditional transaction in a security that is authorized for issuance, but not yet issued. This type of transaction is finalized only on the settlement date.
A company's new issue of securities offered to the public for investment for the first time.
The purchaser agrees to pay the full issue price of a security by a set series of installment payments over time. The receipts trade on the open market. By purchasing a receipt, the new buyer accepts the obligation to pay the next installment(s) on the security. The number of installments, period between installments, and dollar amounts of each installment will vary from issue to issue. Installment receipts often pay the same dividend as the fully paid security, providing the income seeking investor with a leveraged yield on the underlying security.

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The originating investment banking firm of an underwriting group organized for the purchase and distribution of a new issue of securities. The lead underwriter acts as agent for the group in purchasing, carrying and distributing the issue, as well as complying with all federal and provincial requirements. It also forms the selling group, determines the allocation of the securities to each member, make sales to the selling group at a specified discount from the offering price, engage in open market transactions during the underwriting period to stabilize the market price of the security, and borrows from the syndicate account to cover costs.
Organizations made up of a general partner and limited partners. The general partner is responsible for managing the project. Limited partners invest their money, but are not involved in day-to-day management and have limited liability (they usually cannot lose more than their capital contribution). There are tax advantages to a limited partnership holding, since the partners are allowed to deduct a certain percentage of the partnership's operating expenditures from their taxable income. Limited partnerships are typically used for investment in real estate, oil and gas and equipment leasing, but may also be used to finance movies, research and development and other projects.
A security whose return is "linked" or based on the return of an underlying security or index. The issuer ensures the holders a return equal to the return of the underlying investment, less administrative charges and fees. The principle may or may not be guaranteed, and the credit worthiness of the security is based on that of the issuer and not that of the underlying "linked" security.
The usual scenario for a New Issue where the issue is marketed over a period of several days or weeks.
The period where the syndicate is actively selling an issue. During this time, which often lasts several weeks, potential investors have access to the preliminary prospectus and may place an expression of interest.

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The term used to describe how much demand exceeds supply for an issue. For instance, an issue is said to be '3 times oversubscribed' if expressions of interest are 3 times greater than the stock available.
Means "in equal proportion." It usually refers to equally ranking issues of a company's preferred shares.
Not to be confused with Preferred Shares (see below). Subordinated debt structured to trade like preferred shares. Preferred securities are exchange-traded and usually pay quarterly interest income. The term to maturity is typically quite long (usually 49 to 99 years). The coupon is typically higher than comparable fixed income securities.
A type of capital stock that pays dividends at a rate set at the time of issuance. Dividend payments to preferred holders must be made before common share dividends can be paid. Preferred shares usually do not have voting rights.
Cumulative Preferred Shares
A preferred share that has a provision stipulating if one or more dividends are omitted (in arrears) because of insufficient earnings or other reasons, the dividends will accumulate until they are paid to shareholders. Cumulative preferred share dividends have seniority over common share dividends--that is, a common share dividend cannot be paid until all cumulative preferred dividend payments are current.
Non-Cumulative Preferred Shares
Preferred share on which unpaid dividends do not accrue. Unpaid dividends, for the most part, will never be paid. This contrasts with cumulative preferred shares in which unpaid dividends accumulate until paid to shareholders.
Retractable Preferred Shares
A feature of some preferred shares which grants the holder the option, under specified conditions, to redeem the security on a stated date, usually at a stated price.
Callable Preferred Shares
A feature of some preferred shares which grants the issuer the right to redeem, under specified conditions, preferred shares at a stated time and at a stated price.
The first document filed with regulators and released to prospective investors by an underwriter of a new issue. The document offers financial details about the issue but may not contain all the information that will appear in the final prospectus; parts of the document may be changed before the final prospectus is issued. The preliminary prospectus must state that commitment for the purchase and sales of securities cannot be made until a receipt for the final prospectus has been issued.
This is the date set by the underwriters to determine the final terms of the offering. For instance, this is when the final price is set, the yield is finalized and the total size of the offering is announced. This usually occurs approximately one week before the final settlement date.
A security issued to large institutional investors and sophisticated individuals. Requirements for filing a prospectus, detailed disclosure and public notice may be waived, thereby reducing the cost of floating an issue. These investments may be illiquid because the investor is often prohibited from selling the security for a stated period of time. Minimum investment thresholds exist for individual investor participation and individual participation may be subject to further regulatory restrictions.

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A trust which manages a portfolio of real estate to earn profits for shareholders and is usually publicly traded. Modeled on investment companies, REITs may make investments in a diverse array of real estate from shopping centres and office buildings to apartment complexes and hotels. REITs can be a mixture of equity and debt investments. Equity REITs take equity positions in real estate and shareholders receive income from rents received from properties and receive capital gains as buildings are sold at a profit. Mortgage REITs specialize in lending money to building developers and pass interest income to shareholders.
A provision granting the issuer of bonds or preferred shares the right to buy back all or part of an issue prior to the maturity date.
A provision granting the holder of a bond or preferred share the right to sell the security back to the issuer at a specified price and at a specified time.
A security granted to shareholders of a corporation to subscribe for additional shares of common stock from the company, usually at a discount for a limited period of time. Rights are usually transferable and may be traded in the open market.
Royalty Trust Units are a "flow through" type of investment, similar to an interest in a limited partnership. The trust unit holds a variety of assets, such as natural resources, commodities, or real estate and earns cash flow from these investments. The net cash flow (cash flow minus the administration costs) is passed on to the unit holders in the form of interest and dividends.

A portion of this income is treated as a return of capital, and receives preferential tax treatment. Returns on these units is typically higher than current returns for fixed income products like GIC's and government and provincial bonds, however, these units are an equity investment. The value of the trust units will fluctuate based on the value of the underlying asset base, prevailing interest rates and market forces.

The public sale of previously issued securities held by large investors, usually corporations, institutions, or other affiliated persons. Usually handled by investment bankers acting alone or as a syndicate. They purchase the shares from the seller at an agreed price, then resell them at a higher price to the public through a selling group. Do not confuse this with a Treasury Offering, which is the company itself selling additional shares of a security that has already been issued (i.e. issue of additional shares to raise capital).
A security that is backed by a pledge of collateral.
A group of dealers appointed by the lead underwriter (on behalf of the underwriting group) to market a new or secondary issue to the public. The selling group is the distribution arm of the deal. Members may or may not be part of the underwriting group.
This is the date set by the issuer and the lead underwriter for the purchasers of the securities to take delivery and pay for those securities. Members of the selling group may close their books well in advance of this period. Also known in the industry as the closing date.
There are typically two types. One holds a portfolio of securities, similar to a closed-end mutual fund, designed to invest in a specific group of companies or an industry (i.e. banks, oil and gas firms, telecommunications, etc). The other holds an individual security. Both of these styles, however, use the same structure to create 2 classes of securities which are "split" into Preferred Shares and Capital Shares. The Preferred shareholders receive only the dividends from the underlying portfolio, whereas the Capital shareholders usually only receive the capital appreciation in the underlying portfolio (and sometimes the increases in the dividends). Both of these securities provide a leveraged investment on either the dividend (Preferred Shares) or the capital gain (Capital Shares).
Standard and Poor's has created a Canadian Income Fund Stability Rating Scale. Income Funds are ranked based on several criteria, including the fund's underlying business model and the sustainability and variability in distributable cash flow generation in the medium to long term.
Rating: Level of cash distribution relative to other rated Canadian Income Funds:
SR-1 Highest
SR-2 Very High
SR-3 High
SR-4 Moderate
SR-5 Marginal
SR-6 Low
SR-7 Very Low

This category of new issues describes trusts that are managed by professional money managers. Proceeds of an issue are invested in a portfolio of income trusts in an effort to diversify risk and to provide unitholders with a steady income stream. Other features may include capital repayment at maturity, opportunities for redemption without commission, a stated maturity date and TSX listing.
A group of investment dealers who underwrite and distribute a new issue of securities, whether it be an IPO, treasury, or secondary offering.
Issuance of additional shares of an already existing class of security by the company's treasury, as a means of raising capital. This type of offering has the adverse affect of diluting the earnings on the existing shares.
A security structured to pay the investor regular distributions of income (typically, quarterly or monthly) from the income generated by the trust. The trust typically owns corporate securities that provide a stable, predictable cash flow that is distributed to unit holders.
Typically, a security that combines a common or preferred share and a specific number of warrants or rights offered at a single combined price. Upon settlement, components of the unit often separate and trade as individual securities.
A security that is not backed by collateral, but by the general credit worthiness of the issuer.

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Similar to long term options, they give the holder the right to convert the warrant at a set price, into a set number of shares of the associated stock. They are often issued with newly issued common stock or bonds as an inducement or "sweetener" for investors to buy the issue. This combination is called a unit.
Refers to the trading of new issue securities on an exchange before actual settlement and/or official trading is scheduled to begin. If there is enough demand for an issue, the lead underwriter may decide to trade the shares on the market on an "if and when issued basis." A security trading on a "When Issued" basis will typically have a ".W" suffix attached to it's trading symbol. On the actual settlement date, the ".W" is removed.

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The highest price a prospective buyer is willing to pay for a particular security

Crossed Market

Occurs when the National Best Bid price is greater than the National Best Offer price for a security

Execution Quality

A measure of how well a firm is able to obtain the best terms available on the orders they receive. Execution quality can be evaluated on many criteria, including the speed of execution, the price obtained on the execution and the percentage of the order that was executed at expected prices


The amount of shares available for buying or selling in a particular security. Securities with more shares available at the bid and offer prices have greater liquidity than those with fewer shares

Locked Market

Occurs when the National Best Bid price is equal to the National Best Offer price for a security

Market Centre

Any exchange market maker, over the counter market maker, alternative trading system, national securities exchange, or national securities association

Market Maker

An individual or entity that simultaneously provides both a bid and offer price to help ensure liquidity for trading in a particular security

Market Order

An order to buy or sell a security at the best available price

Marketable Order

A market or marketable limit order where at least some portion of the order can be immediately filled at a particular market price

Marketable Limit Order

Any buy order with a limit price equal to or greater than the National Best Offer at the time of order receipt, or any sell order with a limit price equal to or less than the National Best Bid at the time the order is received

National Best Bid and Offer (NBBO)

The highest bid and lowest offer price for a security across all markets where the security is traded


The lowest price a prospective seller is prepared to accept to sell a particular security

Order Router

Proprietary software that receives your order, scans the available markets, and sends your order to one or more markets to be executed

Price Improvement

Orders that are executed at a price superior to the National Best Bid or Offer at the time the order is received