Canadian Capital Markets Flashcards

What does 'market capitalization' measure?

Answer: Total market value of a company's outstanding shares

Market capitalization equals the current share price multiplied by the total number of shares outstanding.

An investor buys a security and simultaneously agrees to sell it back at a specified price and date. This is known as a:

Answer: Repurchase agreement (repo)

A repurchase agreement (repo) involves selling a security with a simultaneous commitment to repurchase it at a future date and price, effectively a short-term secured loan.

Which Canadian body provides investor protection coverage if a CIRO member firm becomes insolvent?

Answer: CIPF

The Canadian Investor Protection Fund (CIPF) protects eligible customer accounts held at insolvent CIRO member firms up to specified limits.

A 'prospectus' is required in the primary market primarily to:

Answer: Provide full, true, and plain disclosure of material facts to investors

A prospectus is a legal document that discloses all material information about a new securities offering so investors can make informed decisions.

What is the role of a 'market maker' on an exchange?

Answer: Continuously quoting bid and ask prices to provide liquidity

Market makers stand ready to buy or sell a security at quoted prices, ensuring continuous liquidity and narrower bid-ask spreads.

Which term describes the difference between the price an underwriter pays for a new issue and the price at which it is offered to the public?

Answer: Gross spread (underwriting discount)

The gross spread is the underwriter's compensation, representing the difference between the public offering price and the amount paid to the issuer.