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Glossary

C-6 index; C-6 exchange rate

An index of the trade-weighted exchange value of the Canadian dollar against six major foreign currencies. Note: The six foreign currencies in the C-6 index are the U.S. dollar, the euro, the yen, the U.K. pound, the Swedish krona, and the Swiss franc. The weights are calculated using the trade flows between Canada and the countries in the index.The CERI (Canadian-dollar effective exchange rate index) replaced the C-6 index in October 2006.

Call loan

A loan which may be terminated or "called" at any time by the lender. The loan is then immediately payable, with any accrued interest, by the borrower to the lender. These loans are used to finance purchases of securities and exclude personal loans extended by banks to its customers.

Call options

An option which gives the holder the right, but not the obligation, to buy a fixed amount of a certain stock at a specified price within a specified time. Calls are purchased by investors who expect a price increase.

Callable

Securities which may be redeemed upon due notice by the security's issuer. In the case of bonds, issuers of bonds may reserve the right to pay off the bond before maturity to take advantage of lower interest rates.

Callable preferred stock

A type of preferred stock that gives a corporation the right to call in the stock at a certain price and to retire the stock.

Canada Deposit Insurance Corporation (CDIC)

A federal government organization that provides insurance to protect money deposited in Canadian banks and certain other financial institutions.

Canada Education Savings Grant (CESG)

This is a Government of Canada grant that is calculated based upon the annual contribution to an RESP for each RESP beneficiary and added to the RESP account annually. It is in addition to the plan sponsor’s contribution. 

The grant is  paid by Human Resources and Social Development Canada (HRSDC) to the RESP trustee for deposit on behalf of the beneficiary.

Canada Pension Plan (CPP)

A Canadian government system in which you pay a percentage of your earnings to a fund that provides income when you retire.

Canada Premium Bond (CPB)

A non-marketable security instrument issued by the Government of Canada, which is redeemable once a year on the anniversary date or during 30 days thereafter without penalty.

Note: Although very similar to the Canada Savings Bond (CSB), the CPB offers a higher interest rate than does the CSB. However, it is not available through payroll deduction programs. The CPB replaces the Canada RRSP bond.

Canada Revenue Agency (CRA)

The federal government agency that collects taxes and administers Canada's tax laws.

Canada Savings Bond

A bond issued each year by the federal government, that can be cashed in at any time for full face value.

Canadian Association of Pension Supervisory Authorities (CAPSA)

The national inter-jurisdictional association of pension supervisory authorities created to facilitate an efficient and effective pension regulatory system in Canada. CAPSA discusses regulatory issues of common interest and develops policies to simplify and harmonize pension legislation across Canada. 

Canadian Dealer Offered Rate (CDOR)

The Canadian Dealer Offered Rate (CDOR) is the recognized benchmark index for Canadian bankers' acceptances (BAs) with a term to maturity of one year or less. It may be viewed generally as the rate at which a principal market-maker would fund a corporate loan without regard to the creditworthiness of the borrower. Determined daily from a survey of eight participants and publicly disseminated by Reuters, CDOR has, over time, been used increasingly in both money markets and derivative markets as a reference rate for futures contracts, forward rate agreements and swaps.

For example - Fixed/Floating rate bonds issued by Canadian banks often have a fixed interest rate to a certain date and then the interest paid on the bond will float according to a calculated rate - ie the sum of the 3-month CDOR plus a certain percentage.

NOTE: CDOR provides the basis for a floating-rate reference in Canadian-dollar transactions analogous to LIBOR.

Canadian Investor Protection Fund (CIPF)

An industry sponsored fund that protects investors from losses resulting from the bankruptcy of a member firm. The maximum coverage is $500,000 per account, of which up to $60,000 can be cash. The CIPF is sponsored by the Investment Dealers Association of Canada, the Toronto Stock Exchange and Futures Exchange, and the Montreal, Vancouver and Alberta Stock Exchanges.

Canadian Overnight Repo Rate Average (CORRA)

A weighted average of rates on overnight general collateral repo transactions conducted through designated interdealer brokers between 06:00 and 16:00.

Note: The Bank of Canada uses two measures of the collateralized overnight rate as proxies for the overall average cost of overnight funding: the CORRA and the overnight money market financing rate. The CORRA is limited to transactions performed in the general collateral repo market and provides a transparent intraday and end-of-day measure of the level of the overnight rate.

Canadian Payments Association

This association operates a highly automated national clearing system for interbank payments which reduces costs and increases the efficiency of the clearing system in Canada. Members include chartered banks, trust and loan companies and some credit unions.

Canadian Securities Administrators (CSA)

The 10 provinces and 3 territories in Canada are responsible for securities regulations. Securities regulators from each province and territory have teamed up to form the Canadian Securities Administrators, or CSA for short. The CSA is primarily responsible for developing a harmonized approach to securities regulation across the country.

The CSA brings provincial and territorial securities regulators together to share ideas and work at designing policies and regulations that are consistent across the country and ensure the smooth operation of Canada's securities industry. By collaborating on rules, regulations and other programs, the CSA helps avoid duplication of work and streamlines the regulatory process for companies seeking to raise investment capital and others working in the investment industry.

Cancel or Change Former Order (CFO)

An order that cancels or changes a customer's current order.

Capital

To economists, capital means the machinery, factories and inventory required to produce other products. To investors, capital means their cash plus the financial assets they have invested in securities, their home and other fixed assets.

Capital asset

All tangible property which cannot easily be converted into cash and which is usually held for a long period, including real estate, equipment, etc.

Capital Cost Allowance

An amount allowed under the Income Tax Act to be deducted from the value of certain assets and treated as an expense in computing an individual's or company's income for a taxation year. It may differ from the amount charged for the period in depreciation accounting.

Capital gain or loss

Profit or loss resulting from the sale of certain assets classified under the federal income tax legislation as capital assets. This includes stocks and other investments such as investment property.

Capital Market

This market brings together all the providers and users of capital, all the financial products, like stocks and bonds which make the transfer of capital possible, and all the people and organizations which support the process.

Capital stock

All shares representing ownership of a company, including preferred as well as common shares.

Capitalization or Capital structure

Total dollar amount of all money invested in a company, such as debt, preferred and common shares, contributed surplus and retained earnings of a company. It can also be expressed as a percentage.

Cash account

An account in which an client/investor pays in full for securities purchased.

Cash flow

A company's net income for a stated period plus any deductions that are not paid out in actual cash, such as depreciation, amortization, deferred income taxes and minority interest. Cash flow can provide a broader picture of a company's earning power than net earnings alone. Cash flow is important to investors as it shows the company's ability to pay dividends and finance expansion.

Central Bank

A body established by a national government to regulate currency and monetary policy on a national and international level. In Canada it is the Bank of Canada. In the United States it is the Federal Reserve Board and in the United Kingdom it is the Bank of England.

Certificate

An engraved document which shows ownership of a bond, stock or other security.

Certificate of Deposit (CD)

A fixed-income debt security issued by most chartered banks, usually in minimum denominations of $1000 with maturity terms of one to six years.

CIFS Committee

The Canadian Investment Funds Standards Committee, which represents Canada's major mutual fund database and research firms (including Morningstar) as well as fund-industry groups, has a self-imposed mandate to standardize the classifications of Canadian-domiciled mutual funds. The primary purpose of the committee is to provide investors with a consistent set of mutual fund categories.

Class A and B Stock

Names used by companies to distinguish between two classes of common stock. Class A stock may receive cash dividends while Class B may receive stock dividends. There also could be differences in voting rights or in priority of assets. The investor should review the terms of the class designation prior to purchase to understand the rights of that class of stock.

Clearing House

An independent institution that ensures the payment and delivery of stocks and bonds between investment dealers in a timely, cost-efficient manner. For example, an investment dealer may execute 10 trades (buys and sells) in the same security on the same day. Through the clearing house the dealer just settles the difference in the number of shares and the difference in money owed or received.

Clone fund

A clone fund is generally a fund that tries to mimic the performance and/or the objectives of a successful existing fund. A common example of a clone fund is a fund company that issues an RRSP version of a foreign equity fund consisting of derivatives managed in a way that duplicates the returns of the underlying fund. A clone could also be a segregated version of a popular fund, featuring a guarantee issued by an insurance company. Even though the clone funds are similar, they should be judged independently on their own financial merits.

Close

The last transaction price for a stock on a particular stock exchange at the end of the trading day. If there was not an actual transaction that day, the close can refer to the last posted bid and ask prices.

Closed-end Investment Company

This is a company which uses its capital to invest in other companies. Shares in a closed-end investment company are bought and sold on the stock market and the company's capital remains relatively unchanged.

CNQ

Canadian Trading and Quotation System Inc., a Canadian stock exchange for trading the equity securities of emerging companies.

Collateral

Securities or other property pledged by a borrower as a guarantee for repayment of a loan.

Collateral Trust Bond

A bond secured by stocks or bonds of companies controlled by the issuing company, or other securities, which are deposited with a trustee.

Comfort Letter/ Comfort Level

A letter filed with the applicable securities commissions by a company's auditor when submitting unsigned financial statements for use in a prospectus. The letter says that the final format of the statements should not be materially different from those attached to the letter. The letter is required because the auditor does not sign the report until the final prospectus is prepared for distribution. The signing is done after the securities commissions have reviewed the prospectus and any required changes have been made.

Commercial Paper

Short-term negotiable debt securities issued by non-financial corporations with terms of a few days to a year.

Commission

The fee charged by an investment advisor for buying or selling securities as an agent on behalf of a client.

Commodities

Products used for commerce that are traded on a separate, authorized exchange, such as the Winnipeg Commodities Exchange or the Chicago Board of Trade. Commodities include agricultural products and natural resources such as timber, oil and metals, and are the basis for futures contracts traded on these exchanges.

Common stock / Common shares

Securities which represent ownership in a company and carry voting privileges. Common shareholders may be paid dividends but only after preferred shareholders are paid. Common shareholders are last in line after creditors, debt holders and preferred shareholders to claim any of a company's assets in the event of liquidation.

Common-law partner

For the purposes of pension legislation, a person who has been co-habiting with a member in a conjugal relationship for at least one year.

Commuted Value

The amount of an immediate lump-sum payment estimated to be equal in value to a future series of payments. The value is based on current market conditions and other assumptions prescribed by the Canadian Institute of Actuaries.

Compound interest

Interest earned on an investment at periodic intervals and added to the original amount of the investment. Future interest payments are then calculated and paid at the original rate but on the increased total of the investment. This is really interest paid on interest.

Compound Interest Bond; C-bond

A Canada Savings Bond or Canada Premium Bond on which interest accrues and is compounded annually to maturity or until redeemed.

Computer Assisted Trading System (CATS)

An electronic trading system developed by the Toronto Stock Exchange that allows traders anywhere in the world to trade stocks listed on the exchange. This was the first electronic trading environment developed in Canada.

Confirmation

Also called a contract. This is a printed acknowledgement giving details of a sale or purchase of a security, which is normally mailed to a client by the investment dealer within 24 hours of an order being executed.

Conglomerate

A company directly or indirectly operating in a variety of industries, usually unrelated to each other. Conglomerates often acquire outside companies through the exchange of their own shares for the shares of the majority owners of the outside companies.

Consolidated Financial Statements

A combination of the financial statements of a parent company and its subsidiaries, presenting the financial position of the group as a whole.

Constrained Share Companies

Canadian banks, trust, insurance, broadcasting and communication companies have limits on the number of shares or percentage of shares owned by people who are not Canadian citizens or residents. Foreign ownership is restricted since these companies or institutions are either culturally important or fundamentally important to the Canadian economy.

Consumer Discretionary Sector

These are companies that manufacture goods or supply services for which consumer demand varies according to economic conditions or season. In general, these are products and services that are purchased after the staples (food and health) are taken care of. Included would be automobiles and auto parts and equipment, consumer electronics, homebuilding, home furnishings and appliances, leisure products including sports equipment, bicycles and toys, apparel and accessories, footwear, hotels, casinos and gaming facilities, restaurants, leisure facilities, broadcasting and cable TV, advertising, and most retailing not related to food and drugs. A very broad (and controversial) definition could be "luxuries."

Consumer Price Index (CPI)

A major inflation measure computed by Statistics Canada. It measures the change in prices of a fixed basket of a variety of goods and services in the previous month. This basket of goods is supposed to reflect the average needs of a Canadian family.

Consumer Staples Sector

These are the companies that manufacture or supply the products and services that consumers generally cannot do without, namely the "non-luxury" items. These include food and drug retailers and distributors, food and beverage producers (including tobacco), household non-durable products such as detergents and paper products such as tissue and diapers, and personal and beauty care products.

Continuance service

The period during which an employee is continuously employed by the same employer. Continuous service may be defined in the pension plan (or by law) to include certain periods of absence and/or of service with an associated or former employer.

Continuous Disclosure

A securities issuer must issue a press release as soon as a material change occurs in its affairs and within ten days for any other changes in the company.

Contributed surplus

Part of shareholders' equity which originates from sources other than earnings, such as the initial sale of stock above par value.

Contributions

Contributions made by a subscriber to an RESP account on behalf of a designated beneficiary. Contributions to an RESP are not tax deductible from the subscriber’s taxable income.

Convertible security

A bond, debenture or preferred share which may be exchanged by the owner, usually for the common stock of the same company. Convertibles are attractive to investors as they provide the security and income of a bond, debenture or preferred share, as well as the opportunity to participate in the growth of the company through converting to common shares.

Convertibles

Corporate securities, usually preferred shares or bonds, that can be converted (exchanged) for a set number of other securities — usually common shares — at a given price. Convertibles are usually considered "sweeteners" to enhance the marketability of securities. Convertibles offer higher income than what is available from common stock, as well as greater potential gains than regular bonds.

Core consumer price index (Core CPI)

A variant of the CPI that excludes eight of its most volatile components which account for 16 per cent of the CPI basket (fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products) as well as the effect of changes in indirect taxes on the remaining components. (Prior to May 2001, the Bank of Canada used the CPI excluding food, energy, and the effect of changes in indirect taxes as its measure of core CPI.)

Corporate Notes

See Note

Corporation or Company

A form of business organization legally created under provincial or federal statutes which has a legal identity separate from its owners. The corporation's owners shareholders debts only to the extent of their investment, which is called limited liability.

Country Banks

A term for non-bank lenders such as corporations, insurance companies and other institutional short-term investors, none of which are under the jurisdiction of the Bank Act, who provide short-term sources of credit for investment dealers.

Coupon

A mini-certificate actually attached to a bond certificate which represents an actual interest payment. The coupon becomes negotiable on the date the interest is due and usually represents the six-month interest payment on the face value of the bond certificate. The term "coupon" is sometimes used as a slang reference to the interest rate paid on a debt instrument, i.e. the coupon of the new Government of Canada March 2015 is 8.75%. This means the interest rate is 8.75% per annum on the face value of the bond.

Cover

Buying a security that you had previously sold short.

Creations and Redemptions - Exchange Traded Funds

Unlike mutual funds, ETFs do not sell holdings in exchange for cash, which would trigger a taxable event. Instead, the ETFs undergo a creation and redemption process in which market makers, authorized participants or large institutional investors swap a basket of securities from the underlying benchmark index for ETF shares, or vice versa.

An authorized participant would borrow shares of stock from an underlying benchmark and put them in a trust to form a so-called creation unit of an ETF. The Trust would provide shares of the ETF that are legal claims on the shares held in the ETF. As such, the authorized participant exchanges the basket of stocks for ETF shares, which are then sold to the public as stocks in the open market.

Conversely, ETF shares may be exchanged for a basket of securities from the underlying benchmark. Someone would have to hoard enough ETF shares to form a creation unit and then exchange the creation unit for shares of the underlying securities. -ETF Trends

Credit Union Deposit Insurance Corporation (CUDIC)

A government organization that provides insurance to protect money deposited in British Columbia credit unions.

Cross on the board

When an investment dealer has both an order to sell and an order to buy the same stock at the same price, the transaction is allowed without interfering with the limits of the prevailing market. This is also called a put-through or contra order.

Cum Dividend

This means "with dividend." Buyers of shares quoted cum dividend are entitled to an upcoming already-declared dividend.

Cum Rights

This means "with rights." Buyers of shares quoted cum rights are entitled to forthcoming rights.

Cumulative Preferred

A preferred stock which has a provision that if one or more of its dividends are omitted, these unpaid dividends accumulate and must be paid before any dividends may be paid on the company's common shares.

Currency Hedging

Currency Hedging is a transaction that allows funds the opportunities to use different currencies to protect against currency fluctuations, as well as offering speculators the potential for capital gains.

Current assets

Cash and assets such as accounts receivable and inventories, which in the normal course of business can be converted into cash within a year. Current assets are found on the company's balance sheet.

Current liabilities

Money owed to the company and due to be paid within a year, such as accounts payable. Current liabilities are found on the company's balance sheet.

Current market value

This term refers to the current market price of the securities in an account based on the closing price on the previous business day.

Current Ratio or Working Capital Ratio

Current assets of a business divided by current liabilities, thus measuring how much the value of current assets exceeds its liabilities. This is one of the tests to determine how much cash a company has on hand to cover its current liabilities.

Current return / yield

The annual income from an investment expressed as a percentage of the investment's current value. On stock, this is calculated by dividing yearly dividends by the market price of the security. On bonds, this is calculated by dividing yearly interest by current price. For example, if the income is $50 a year on an investment with a value of $1,000, the current yield is 5%.

CUSIP

This is an acronym for Committee on Uniform Security Identification Procedures. It is a standard system for the identification and description of securities.

Cyclical stock

Stock in an industry that is particularly sensitive to swings in economic conditions, such as mining or forestry.

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