The Canadian securities industry raises capital for start-up and existing businesses and governments and allows investors to trade with confidence in open and fair capital markets. Investment dealers play an essential role in the Canadian securities industry by:
- Providing financial advice to investors and executing trades on their behalf as they save for retirement
- Raising all forms of capital for new and expanding businesses
- Underwriting and acting as primary distributors for government debt
- Creating markets by trading on their own accounts
Three categories of firms make up the Canadian securities industry: integrated firms, institutional firms and retail firms.
Integrated firms offer the broadest range of products and services, covering all aspects of the industry, including full participation in both the institutional and the retail markets. There are 11 integrated firms providing retail and institutional business to clients.
In 2009, 72 foreign and domestic institutional firms served institutional clients almost exclusively. Foreign firms account for about 30 per cent of total institutional firms and include affiliates of many of the major U.S. and European securities dealers.
117 retail firms account for the remainder of the industry. Retail firms include full service firms and discount brokers. Full service retail firms offer a wide variety of products and services for the retail investor. Discount brokers execute trades over the telephone and over the internet for clients at reduced rates but do not provide advice. Discount brokers are more popular with those investors who are willing to research individual companies themselves in exchange for lower commission rates. The retail sector of the industry has grown significantly over the past five years.
Alternative trading systems (ATSs) have entered the Canadian marketplace. ATSs operating here are electronic marketplaces for debt and equity instruments and are mainly focused on institutional clients.
The two main groups of products traded in the securities industry are equities and debt or fixed income securities. Generally, equities (both common and preferred stocks) are traded on stock exchanges. Fixed income products consisting mainly of bonds and money market instruments such as treasury bills, commercial paper and bankers' acceptances, are traded on a principal basis over the dealing desks of member firms. Mutual funds are also offered at securities firms. Industry participants also trade more sophisticated instruments such as options, futures or other risk management products.
Providing businesses and governments with access to capital
The Canadian securities industry plays a key role in assisting companies and governments to raise capital. The securities industry raises debt and equity capital for companies, both large and small. This capital is used to help companies grow by allowing for the development of new products or the expansion of existing operations, in the process helping to create more jobs for Canadians. Governments raise debt in the Canadian capital markets to fund their operations.
In the 10 years from 1999 to 2009:
- Approximately $452 billion in new equity has been raised in over 27,000 financings
- Investment trusts have raised an additional $106 billion in capital
- $627 billion has been raised in the corporate debt market and the amount has been rising steadily over this period
- $1.1 trillion in debt has been raised for municipal, provincial and federal governments.
The first time a company uses the public equity markets to raise capital is referred to as an initial public offering (IPO). The amount of IPO financings is generally used as a proxy for the total amount of capital provided to start-up businesses.
In the past 10 years, there have been 2,639 IPOs issued in Canada valued at over $95 billion.
The increasing importance of the Canadian securities industry
The past decade has seen extraordinary growth in the number of individual Canadians participating in the Canadian capital markets. Canadians have made a transition from a nation of savers to a nation of investors drawn to the securities market by lower fixed-income returns and the realization that government pension offerings may not be sufficient for their planned retirement. Personal investing has expanded as bank customers have shifted from savings accounts and term deposits to mutual funds and other saving vehicles.
The numbers tell the story: roughly one half of all working Canadians are directly and indirectly invested in the securities market. In the 10 years to 2009, Canadian investors' assets held with a brokerage firm have more than doubled to approximately $900 billion. Retail investors executed over 23 million trades through full-service and self directed brokerages in 2009, up over 125% from 5 years ago. Canadians are increasingly turning to the securities industry to ensure their prosperity and future retirement security.
For more information on the investment and securities industry, see the Who we are section.
Register Now - IIAC Social Media Conference: Practical Tools and Tips for Implementing a Successful Social Media Plan for your Firm
Thursday, May 16, 2013
Save the Date - IIAC Small and Independent Dealer Symposium: New Strategies for Success in the Evolving Market
Tuesday, June 25, 2013
Save the Date - IIAC Annual Conference: As Markets Heal, Confidence Rebuilds
Thursday, October 3, 2013
Save the Date - IIAC Investment Industry Hall of Fame Induction Ceremony
(Following the 2013 IIAC Annual Conference)
Thursday, October 3, 2013