CIRO Institutional Securities key terms

The obligation to ensure a recommendation or trade is appropriate for a client's investment objectives, risk tolerance, financial situation and knowledge, judged against the information the firm holds about that client.

The process of classifying counterparties as retail, professional or eligible counterparties, which determines the protections, disclosures and conduct rules that apply to the relationship.

Prohibited conduct in wholesale markets including insider dealing, unlawful disclosure of inside information and market manipulation, enforced through surveillance, transaction reporting and disciplinary or criminal sanctions.

The due diligence process of identifying a client, verifying its identity, understanding its ownership, business and source of funds, and recording its risk profile before establishing a relationship.

Identification of the natural persons who ultimately own or control a legal entity or the assets in an account, typically above a defined ownership or control threshold.

An individual entrusted with prominent public functions, or a close associate or family member, whose accounts attract enhanced due diligence because of heightened corruption and bribery risk.

Additional scrutiny applied to higher-risk relationships, such as those involving foreign PEPs, offshore structures or high-risk jurisdictions, including source-of-wealth checks and senior management approval.

The electronic record of resting buy and sell orders for a security, showing price levels and available quantities, which underpins price formation on lit trading venues.

A trading venue that publicly displays current bid and offer prices and the depth of trading interest before trades execute, typically a regulated market or multilateral trading facility.

A trading venue where orders are not publicly displayed before execution, used by institutions to trade large blocks while limiting information leakage and market impact.

An entity that interposes itself between trade counterparties, becoming buyer to every seller and seller to every buyer, and manages default risk through margin and a default fund.

The legal process by which a central counterparty replaces the original bilateral contract between two parties with two new contracts, one with each original party.

The post-trade process of confirming trade details, netting obligations and establishing the payment and delivery positions that must be settled on the settlement date.

The standard elapsed time between trade execution and final exchange of cash and securities, commonly two business days in many major equity markets.

A settlement mechanism in which the transfer of securities occurs only if the corresponding cash payment occurs simultaneously, reducing principal risk for both parties.

A financial institution that safekeeps client securities, processes corporate actions and settles trades on the client's behalf, often through local sub-custodians in foreign markets.

A measure of a bond's price sensitivity to changes in interest rates, expressed in years, indicating the approximate percentage price change for a one percentage point yield move.

The single discount rate that equates a bond's future coupon and principal cash flows to its current market price, assuming the bond is held to redemption.

The yield differential between a corporate or other non-government bond and a comparable-maturity government benchmark, reflecting perceived default and liquidity risk.

A unit equal to one hundredth of one percentage point, used to quote yields, spreads, fees and interest rate changes in precise increments.

A sale and repurchase agreement in which one party sells securities and agrees to buy them back later at a slightly higher price, economically a secured short-term borrowing.

The percentage discount applied to the market value of collateral in secured lending or margin transactions, protecting the lender against price declines and liquidation costs.

The interest rate implied by the difference between the repurchase price and the original sale price in a repo, annualised and typically quoted in basis points.

A collective investment vehicle holding short-dated, high-quality debt instruments such as treasury bills and commercial paper, managed to preserve capital and provide daily liquidity.

An unsecured short-term promissory note issued by corporations to fund working capital, typically with maturities of up to 270 days and sold at a discount.

Collateral posted at the outset of a derivative or securities financing position to cover potential future exposure over the close-out period in the event of counterparty default.

Collateral transferred daily to reflect the current mark-to-market change in value of an open position, settling accumulated gains and losses between counterparties.

Valuing a position at the price at which it could be closed or sold in the current market, used for margin calculations, collateral valuation and profit and loss reporting.

The risk that the other side of a transaction fails to meet its payment or delivery obligation, requiring credit assessment, exposure limits and collateral arrangements.

A privately negotiated agreement to buy or sell an asset at a specified price on a future date, traded over the counter and carrying bilateral counterparty exposure.

An exchange-traded, standardised agreement to buy or sell an asset at a set price on a future date, cleared centrally and margined daily.

The price paid by the buyer to the seller for an option, representing the right to exercise and comprising intrinsic value plus time value.

An agreement between two parties to exchange interest payment streams, commonly fixed for floating, on a specified notional amount over a defined term.

The exchange rate quoted for immediate or short-dated delivery between two currencies, forming the base from which forward rates are calculated.

The adjustment added to or subtracted from the spot rate to derive a forward exchange rate, reflecting the interest rate differential between the two currencies.

The risk that one party to a foreign exchange transaction pays away its currency but does not receive the counter-currency because the counterparty fails, typically due to time-zone differences.

The process of settling a transaction between parties in different jurisdictions, involving correspondent banks, local market rules and exposure to time-zone and legal differences.

A service in which one institution safekeeps and administers a client's securities across multiple markets through a network of local sub-custodians and agents.

The process of soliciting indicative investor demand and price sensitivity during a new issue, allowing the underwriter to set the final offer price and allocation.

An arrangement in which a firm commits to purchase unsold securities in a new issue, or uses reasonable efforts to place them, in return for a fee.

An over-allotment option allowing the underwriter to sell additional shares beyond the original offer size, typically up to fifteen percent, to support post-listing price stability.

Permitted market intervention by underwriters after a new issue begins trading, buying shares to prevent or slow a price decline within regulatory limits and disclosure requirements.

The duty to take all sufficient steps to obtain the best possible result for clients when executing orders, considering price, cost, speed, likelihood of execution and settlement.

The adverse price movement caused by a trader's own order revealing information or consuming liquidity, a key cost considered when choosing execution strategy for large orders.

Automated order generation and routing using predefined parameters, used to control execution pace and market impact, and subject to controls against erroneous or disorderly orders.

Placing orders with no intention to execute them in order to create a false impression of supply or demand and move prices, a form of market manipulation.

Submitting multiple non-genuine orders at different price levels on one side of the book to induce other participants to trade, then cancelling them, a manipulative pattern.

Precise, non-public information relating to an issuer or financial instrument that, if made public, would likely significantly affect its price, and whose misuse is prohibited.

An information barrier separating teams such as corporate finance and sales and trading within a firm to prevent the improper flow of confidential or inside information.

Situations where a firm's or employee's interests may improperly influence advice or execution, requiring identification, disclosure, avoidance or management through policy and controls.

A fee, commission or non-monetary benefit paid or received by a firm in connection with client business that may compromise the duty to act in the client's best interest.