CIRO Trader flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Order Protection Rule
- Marketable orders must be routed to the best-priced protected order across Canadian marketplaces before executing at a worse price, preventing trade-throughs of protected quotes.
- Best Execution Factors
- Price, speed, likelihood of execution and settlement, order size and nature, and total cost including commissions and fees must all be weighed when routing client orders.
- Material Non-Public Information
- Information that could affect a security's price and has not been generally disclosed. Trading or tipping on it violates insider trading rules.
- Wash Trade
- A purchase and sale of the same security where beneficial ownership does not change. It is prohibited because it creates false volume and misleading activity.
- Spoofing
- Entering orders with the intent to cancel them before execution, creating a false impression of supply or demand to induce other participants to trade.
- Board Lot
- Standard trading unit: 100 shares for securities priced at or above $1.00 and 500 shares for securities priced below $1.00 on Canadian exchanges.
- T+1 Settlement
- Canadian equity trades settle one business day after trade date. Allocations and affirmations must be completed to meet the cycle.
- Dark Pool
- An alternative trading system that provides no pre-trade transparency; trades print post-trade, subject to minimum size thresholds for certain order types.
- Principal Versus Agent
- A principal dealer trades for its own account against the client; an agent acts on the client's behalf. Capacity must be disclosed on the confirmation.
- Limit Order
- An order to buy at or below a specified maximum price, or sell at or above a specified minimum price, protecting against adverse price movement.
- Market Order
- An order to execute immediately at the next available price. It offers speed and certainty of execution but carries price risk.
- Reserve Order
- An order displaying only part of its quantity while hiding the remainder. Hidden quantity loses time priority until it is refreshed to the book.
- Short Sale Locate
- Before executing a short sale, the dealer must have reasonable grounds to believe the security can be borrowed for delivery.
- Front-Running
- Trading ahead of a known client order to profit from the expected price impact. It is prohibited and breaches the client-first duty.
- Marking the Close
- Trading near the market close to influence the closing price, often to affect valuations, index levels, or performance figures. It is manipulative.
- Layering
- Placing multiple orders at different prices to create a false impression of market depth, then cancelling them. A form of spoofing.
- Know Your Client
- Collecting and updating a client's financial circumstances, objectives, time horizon, risk tolerance, and investment knowledge before making recommendations.
- Suitability Obligation
- A reasonable basis to believe a recommendation fits the client's KYC profile. The duty is ongoing and applies to each recommendation.
- Know Your Product
- The firm must understand a product's structure, risk, cost, and liquidity before recommending it, including how it behaves in stressed markets.
- Conflicts of Interest
- Situations where the firm's or representative's interest may conflict with the client's. They must be identified, disclosed, and managed or avoided.
- Discretionary Account
- An account in which the representative may trade without prior client approval for each order. Written authorization and ongoing supervision are required.
- Central Counterparty
- An entity that interposes itself between trade counterparties through novation, assuming counterparty credit risk and supporting clearing and settlement.
- Marked to Market
- Daily revaluation of futures and margin positions against market prices, producing variation margin calls that must be met to maintain the position.
- ISDA Master Agreement
- The standard contract framework governing OTC derivative transactions between counterparties, covering netting, events of default, and close-out mechanics.
- Structured Product
- A note or deposit combined with a derivative. Payoff formulas, caps, barriers, and principal protection terms must be explained before sale.
- Listed Option Writer
- The seller of an option who receives premium and assumes the obligation to deliver or take delivery if assigned, with margin held by the clearing corporation.
- Failed Trade
- A trade not settled on the due date. It triggers buy-in and compensation rules, and the failing party bears the cost of covering the delivery.
- Trade Reporting
- Submission of reportable trade details to the regulator or marketplace within prescribed timeframes. Both accuracy and timeliness are required.
- Personal Trading Pre-Clearance
- A requirement that representatives obtain approval before trading personal accounts, with restricted lists governing issuers in sensitive mandates.
- Recordkeeping Duty
- Firms must retain order tickets, client instructions, and communications for prescribed periods. Electronic messages are discoverable and must be captured.
- Price Improvement
- Execution at a better price than the prevailing best quote. It must be documented and consistent with the firm's best execution policy.
- Prohibited Practices
- Wash trades, pre-arranged trades outside permitted facilities, and trades at prices unrelated to the market are prohibited under market integrity rules.