5130. Definitions

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    1. In Rules 5100 through 5900, unless stated otherwise, any term used that is not defined here or in the Rule where it is used, but is defined or used in Form 1, has the meaning defined or used in Form 1.
    2. For all positions subject to margin, the term:

      “client account margin”

      1. A minimum percentage of a security’s or derivative contract’s market value, or
      2. a calculated dollar amount

      that a client must deposit with a Dealer Member when borrowing from the Dealer Member to buy securities or to sell securities short or to enter into the derivative contract.

      “Dealer Member inventory margin”

      1. A minimum percentage of a security’s or derivative instrument’s market value, or
      2. a calculated dollar amount

      that a Dealer Member must provide when calculating its risk adjusted capital.

      “equivalent number” or “equivalent quantity” or “equivalent quantities”

      1. A position with the same underlying number of shares, units of the same issuer,
      2. futures contracts based on the same underlying number of shares, units of the same issuer, or
      3. a position with the same currency denomination and market value,

      as the offset or combination position with which it is paired.

      “loan value”

      The complement of the client account margin and is the maximum a Dealer Member may loan to a client for a particular security or derivative position.

      “normal margin” or “normal margin required”

      Margin otherwise required in Rules 5200 through 5900.

      “underlying interest” or “underlying security” or “underlying basket of securities”

      In the case of:

      1. a convertible security, the security to be received upon invoking the conversion or exchange feature,
      2. an exercisable security, the security to be received upon invoking the exercise feature,
      3. an index participation unit, the basket of securities to be received upon invoking the conversion or exchange feature,
      4. an installment receipt, the security that has been purchased on an installment basis by the holder of the installment receipt,
      5. residual debt securities and strip debt securities, the debt security used to create the residual debt securities and strip debt securities,
      6. currency options, the currency referenced by the option,
      7. equity, index participation unit and debt options, the security referenced by the option,
      8. index options, the index referenced by the option, and
      9. a total performance swap, the security or basket of securities on which the swap is based.
    3. For positions in and offsets involving debt securities and related instruments, the term:

      “acceptable commercial, corporate and finance company notes”

      Notes issued by a company that meet the requirements in subsection 5220(2).

      “call protection period”

      The period of time during which the issuer cannot redeem a callable debt security.

      “callable debt security”

      A debt security which can be redeemed by the issuer at a fixed price at any time other than during the call protection period.

      “Canada debt securities”

      Bonds, debentures, treasury bills, notes and certain other non-commercial debt securities not in default that are issued or guaranteed by the government of Canada.

      “Canada Municipal debt securities”

      Bonds, debentures, treasury bills, notes and certain other non-commercial debt securities not in default that are issued or guaranteed by a Canadian municipal government.

      “Canada Provincial debt securities”

      Bonds, debentures, treasury bills, notes and certain other non-commercial debt securities not in default that are issued or guaranteed by a Canadian provincial government.

      “Canada Provincial residuals”

      A residual portion from a debt security issued or guaranteed by a Canadian province.

      “Canada Provincial strips”

      A strip coupon from a debt security issued or guaranteed by a Canadian province.

      “Canada residuals”

      A residual portion from a debt security issued or guaranteed by the Government of Canada.

      “Canada strips”

      A strip coupon from a debt security issued or guaranteed by the Government of Canada.

      “Canadian banker acceptance futures contract”

      A three month Canadian bankers acceptance futures contract that trades on the Bourse de Montreal under the “BAX” trading symbol.

      “extendible debt security”

      A debt security which allows a Dealer Member holder, during a fixed time period, to:

      1. extend the security’s maturity date to the extension maturity date, and
      2. in change the principal amount of the security by a fixed percentage (the extension factor) of the original principal amount.

      “extension election period”

      The period of time during which a Dealer Member holder may elect to:

      1. extend the maturity date, and
      2. in change the principal amount,

      of an extendible debt security.

      “extension factor”

      The fixed percentage used to change the original principal amount of an extendible debt security, if any.

      “floating rate debt obligation”

      A debt security of either a government issuer that otherwise meets the requirements under subsection 5210(1) or a corporate issuer that otherwise meets the requirements under subsection 5220(1), with terms that provide for interest rate adjustments at least quarterly with reference to an interest rate set for a term of 90 days or less.

      “low current credit rating”

      For a Canadian issuer, a current credit rating of “B” or lower by DBRS; and for U.S. pay securities, a current credit rating of “B” or lower by Moody’s or S &P Corporation.

      “maturity band”

      The range of years within which the debt security subject to margin matures.

      “retractable debt security”

      A debt security which allows the Dealer Member holder, during a fixed time period, to:

      1. retract the security’s maturity date to the retraction maturity date, and
      2. change the principal amount of the security by a fixed percentage (the retraction factor) of the original principal amount.

      “retraction election period”

      The period of time during which a holder may elect to:

      1. retract the maturity date, and
      2. change the principal amount

      of a retractable debt security.

      “retraction factor”

      The fixed percentage used to change the original principal amount of a retractable debt security, if any.

      “United States debt securities”

      Bonds, debentures, treasury bills, notes and certain other non-commercial debt securities not in default that are issued or guaranteed by the government of the United States.

    4. For positions in and offsets involving equity and equity index securities and rights and warrants, the term:

      “basic margin requirement”

      A customized security specific margin rate for a security that is based on the security’s traded price per share.

      “Canada and United States listed equity securities eligible for margin”

      Securities (other than bonds, debentures, rights and warrants) listed on any acceptable exchange or market tier in Canada or the United States with adequate minimum pre-tax profit, net tangible asset and working capital requirements, as determined by IIROC.

      “Canada and United States unlisted equity securities eligible for margin”

      Unlisted:

      1. equity securities of insurance companies licensed to do business in Canada,
      2. equity securities of Canadian banks,
      3. equity securities of Canadian trust companies,
      4. senior equity securities of other Canadian and United States listed companies,
      5. equity securities which qualify as legal for investment by Canadian life insurance companies, without recourse to the basket clause, and
      6. equity securities which have received conditional approval to list on an acceptable exchange in Canada within the last 90 days.

      “control block”

      A person’s or combination of persons’ holdings of an issuer’s securities in sufficient number to materially affect control of that issuer. If a person or combination of persons holds over 20% of the outstanding voting securities of an issuer that person or combination of persons must, absent evidence to the contrary, be considered to materially affect control of that issuer.

      “floating rate preferred share”

      A special or preferred share with terms that provide for dividend rates that fluctuate at least quarterly in tandem with a prescribed short term interest rate.

      “foreign listed equity securities eligible for margin”

      Securities (other than bonds, debentures, rights and warrants) listed on an applicable exchange outside of Canada and the United States that are constituent securities for the exchange’s major broadly based index, and the index is on IIROC’s List of foreign market indices whose constituent securities are eligible for margin.

      “future payments”

      The unpaid payments of the purchase price for an underlying security of an installment receipt.

      “government guaranteed equity securities”

      Equity securities where the payment of all dividends, redemption amounts, or other return of capital to holder is unconditionally guaranteed by Government of Canada or by a provincial government.

      “installment receipt”

      A security issued by or for an issuer or selling security holder that:

      1. evidences partial payment for an underlying security of an installment receipt, and
      2. requires one or more subsequent payments by installment,

      to entitle the holder of the installment receipt to delivery of the underlying security of an installment receipt.

    5. For positions in underwriting commitments and positions traded on a when issued basis, the term:

      “appropriate documentation”

      With respect to the portion of the commitment where expressions of interest have been received from exempt purchasers means, at a minimum:

      1. that the lead underwriter has a record of the final affirmed exempt purchaser allocation indicating for each expression of interest:
        1. the name of the exempt purchaser,
        2. the name of the employee of the exempt purchaser accepting the amount allocated, and
        3. the name of the representative of the lead underwriter responsible for affirming the amount allocated to the exempt purchaser, time stamped to indicate date and time of affirmation
      2.      and,
      3. that the lead underwriter has notified in writing all the banking group participants when the entire allotment to exempt purchasers has been affirmed pursuant to clause (i) above so that all banking group participants may take advantage of the reduction in the margin requirement.

      Under no circumstances may the lead underwriter reduce its own margin requirement on a commitment due to such expressions of interest from exempt purchasers without providing notification to the rest of the banking group.

      "commitment"

      Pursuant to an underwriting agreement or banking group agreement to purchase a new issue of securities or a secondary issue of securities means, where all other non-pricing agreement terms have been agreed to, where two of the following three pricing terms have been agreed to:

      1. issue price,
      2. number of shares, or
      3. commitment amount (issue price x number of shares).

      “disaster out clause”

      A provision in an underwriting agreement substantially in the following form:

      • “The obligations of the Underwriter (or any of them) to purchase (the Securities) under this agreement may be terminated by the Underwriter (or any of them) at its option by written notice to that effect to the Company at any time prior to the Closing if there should develop, occur or come into effect or existence any event, action, state, condition or major financial occurrence of national or international consequence or any law or regulation which in the opinion of the Underwriter seriously adversely affects, or involves, or will seriously adversely affect, or involve, the financial markets or the business, operations or affairs of the Company and its subsidiaries taken as a whole.”

      “exempt purchaser”

      An accredited investor that qualifies as an institutional client.

      “market out clause”

      A provision in an underwriting agreement which permits an underwriter to terminate its obligation to purchase in the event of unsalability due to market conditions, substantially in the following form:

      • “If, after the date hereof and prior to the Time of Closing, the state of financial markets in Canada or elsewhere where it is planned to market the Securities is such that, in the reasonable opinion of the Underwriters (or any of them), the Securities cannot be marketed profitably, any Underwriter shall be entitled, at its option, to terminate its obligations under this agreement by notice to that effect given to the Company at or prior to the Time of Closing.”

      “new issue letter”

      An underwriting loan facility in a form satisfactory to IIROC.

      “normal new issue margin”

      1. Where, in the case of an equity security, the market value is $2.00 per share or more and the equity security qualifies for inclusion on the List of Securities Eligible for Reduced Margin, 60% of normal margin for the period from the date of commitment to the business day prior to settlement date and 100% of normal margin from settlement date on,
      2. where, in the case of an equity security, the market value of the security is $2.00 per share or more and the security does not qualify for inclusion on the List of Securities Eligible for Reduced Margin, 80% of normal margin for the period from the date of commitment to the business day prior to settlement date and 100% of normal margin from settlement date on, or
      3. in all other instances, 100% of normal margin.

      “trading on a when issued basis”

      Purchases or sales of a security to be issued under:

      1. a prospectus offering if a receipt for a (final) prospectus for the security has been issued but the offering has not closed and settled,
      2. a proposed plan of arrangement, an amalgamation, or a take-over bid, prior to the date the security is issued under the amalgamation, arrangement or take-over bid, or
      3. any other transaction that is subject to the satisfaction of certain conditions, provided that the trading of the security on a when issued basis would not contravene securities laws.
    6. For positions in and offsets involving capital shares, convertible securities and exercisable securities, the term:

      “capital share”

      A share issued by a split share company that represents all or most of the capital appreciation part of an underlying common share.

      “capital share conversion loss”

      Any excess of the market value of a capital share position over its retraction value.

      “combined conversion loss”

      Any excess of the combined market value of positions in capital shares and split share preferred shares over their combined retraction value.

      “conversion loss”

      Any excess market value of a convertible security position over the market value of the equivalent number of underlying securities.

      “convertible security”

      A convertible security, exchangeable security or any other security that entitles the holder to acquire another security, the underlying security, upon exercising a conversion or exchange feature.

      “currently convertible”

      A security that is:

      1. convertible within 20 business days into another security, the underlying security, or
      2. convertible after the expiry of a specific period into another security, the underlying security, and the Dealer Member or client has entered into a term securities borrowing agreement, which includes the minimum agreement terms specified in subsection 5840(3), enabling a borrow of the underlying security for the entire period from the current date until the expiry of the specific period until conversion.

      “currently exercisable”

      A security that is exercisable into the underlying security:

      1. exercisable within 20 business days into another security, the underlying security, or 
      2. exercisable after the expiry of a specific period into another security, the underlying security, and the Dealer Member or client has entered into a term securities borrowing agreement, which includes the minimum agreement terms specified in subsection 5840(3), enabling a borrow of the underlying security for the entire period from the current date until the expiry of the specific period until exercise.

      “exercisable security”

      A warrant, right, installment receipt, or any other security entitling the holder to acquire the underlying security after making an exercise or subscription payment.

      “exercise loss”

      Any excess of the sum of the market value of an exercisable security position and its exercise or subscription payment requirement over the market value of the equivalent number of underlying securities.

      “Newco securities”

      Securities of a successor issuer or issuers resulting from an amalgamation, acquisition, spin-off or any other securities related reorganization transaction.

      “Oldco securities”

      Securities of a predecessor issuer or issuers resulting from an amalgamation, acquisition, spin-off or any other securities related reorganization transaction.

      “retraction value”

      A value assigned to capital shares or a combination of capital shares and split share preferred shares, and is calculated as follows:

      1. for capital shares:
        1. where the capital shares can be tendered to the split share company for retraction directly for the underlying common shares, at the option of the holder, the excess of the market value of the underlying common shares received over the retraction cash payment to be made when retraction of the capital shares takes place,
        2. where the capital shares cannot be tendered to the split share company for retraction directly for the underlying common shares at the option of the holder, the retraction cash payment to be received when retraction of the capital shares takes place,
      2. for capital shares and split share preferred shares in combination:
        1. where the capital shares and split share preferred shares can be tendered to the split share company for retraction directly for the underlying common shares, at the option of the holder, the market value of the underlying common shares received,
        2. where the capital shares and split share preferred shares cannot be tendered to the split share company for retraction directly for the underlying common shares at the option of the holder, the retraction cash payment to be received when retraction of the capital and split share preferred shares takes place.

      “split share company”

      A corporation formed for the sole purpose of acquiring underlying common shares and issuing its own:

      1. capital shares based on all or most of the capital appreciation portion, and
      2. split share preferred shares based on all or most of the dividend income portion,

      of those underlying common shares.

      “split share preferred share”

      A share issued by a split share company that represents all or most of the dividend part of the underlying common share, and includes equity dividend shares of split share companies.

    7. For positions in and offsets involving swaps, the term:

      “fixed interest rate”

      An interest rate that is not reset at least every 90 days.

      “floating interest rate”

      An interest rate that is not a fixed interest rate.

      “interest rate swap”

      An agreement under which a Dealer Member is required to pay a fixed (floating) rate and entitled to receive a floating (fixed) rate amount calculated with reference to a notional amount.

      “realization clause”

      An optional clause within a total performance swap agreement which allows the Dealer Member to close out the swap agreement at the realization price (either the buy-in or sell-out price) of the security position involved in the offset.

      “total performance swap”

      An agreement under which a Dealer Member is required to pay and entitled to receive amounts calculated:

      1. based on the performance of a specified underlying security or underlying basket of securities, and
      2. with reference to a notional amount.
    8. For positions in and offsets involving foreign exchange exposures, the term:

      “foreign exchange position”

      A monetary asset or liability including a:

      1. currency spot position,
      2. futures and forward contract,
      3. swap, and
      4. any other transaction resulting in exposure to foreign exchange rate risk,

      that is denominated in a foreign currency.

      “monetary asset or liability”, “monetary asset”, “monetary liability”

      A Dealer Member’s asset or liability:

      1. in money and claims to money,
      2. denominated in foreign or domestic currency, and
      3. that is fixed by contract or otherwise.

      “net long (short) foreign exchange position”

      The net of monetary assets and liabilities as calculated on Form 1, Schedule 11.

      “spot exchange rate”

      The rate quoted by a recognized quote vendor for contracts with a term to maturity of one day.

      “term to maturity”

      For a monetary asset or liability means the amount of time from the present to the time when the claim to the monetary asset or the obligation to satisfy the monetary liability expires.

    9. For positions in and offsets involving derivative products, the term:

      “aggregate current value”

      For index options:

           index level        x       $1.00        x       unit of trading

      “aggregate exercise value”

      For options:

          option exercise price     x     unit of trading

      “at-the-money”

      1. For equity, index participation unit, debt and currency options, that the market price, and
      2. for index options, that the current value

      of the underlying interest is equal to the exercise price for a call option or a put option.

      “call option”

      1. An exchange-traded option that:
        1. for equity, index participation unit, debt and currency options, gives a holder the right to buy and the writer the obligation to sell the underlying interest at a stated exercise price on or before the option expiration date, and
        2. for index options, gives the holder the right to receive and the writer the obligation to pay, if the current value of the index rises above the exercise price, the difference between the aggregate exercise price and the aggregate current value of the underlying interest on or before the option expiration date,
      2. an over-the-counter option that either:
        1. gives a holder the right to buy and the writer the obligation to sell the underlying interest at a stated exercise price on or before the option expiration date, or
        2. gives the holder the right to receive and the writer the obligation to pay, if the current value of the underlying interest rises above the exercise price, the difference between the aggregate exercise price and the current value of the underlying interest on or before the option expiration date.

      “clearing corporation”

      The Canadian Derivatives Clearing Corporation, the Options Clearing Corporation or any other corporation or organization recognized by the Board.

      “cumulative relative weight percentage”

      An overall relative weight percentage determined by calculating, in accordance with subsection 5360(5), the actual basket weighting for each security in a qualifying basket of index securities in relation to its latest published relative weighting in the index.

      “escrow receipt”

      A document issued by a financial institution approved by a clearing corporation certifying that a security is held and will be delivered by that financial institution when a specified option is exercised.

      “exchange-traded option”

      A call option or put option issued by the Canadian Derivatives Clearing Corporation, the Options Clearing Corporation or any other corporation or organization recognized by the Board.

      “exercise price”

      1. For equity, index participation unit, debt and currency options, the specified price per unit at which the underlying interest may be bought under a call option, or sold under a put option, and
      2. for index options, the specified price per unit that may be received by the holder and paid by the writer under a call option or a put option,

      on exercise of the option.

      “floating margin rate”

      The floating margin rate set by IIROC in accordance with subsection 5360(3).

      “incremental basket margin rate”

      The incremental basket rate for a qualifying basket of index securities calculated in accordance with subsection 5360(6).

      “index”

      An equity index in which:

      1. the basket of equity securities underlying the index consists of eight or more securities,
      2. the single largest security position by weighting comprises not more than 35% of the overall market value of the basket,
      3. the average market capitalization for each security position in the basket of equity securities underlying the index is at least $50 million, and
      4. the securities constituting the foreign equity index are listed and traded on an exchange that meets the criteria for an applicable exchange.

      “index futures contract”

      An exchange-traded futures contract with an underlying interest that is an index.

      “index option”

      An exchange-traded option with an underlying interest that is an index.

      “index participation unit”

      An interest in a trust or other entity that has assets consisting of equities or other securities underlying an index.

      “index participation unit option”

      An option with an underlying interest that is an index participation unit.

      “in-the-money”

      1. For equity, index participation unit, debt and currency options, that the market price, and
      2. for index options, that the current value,

      of the underlying interest is above the exercise price for a call option, and below the exercise price for a put option.

      “out-of-the-money”

      1. For equity, index participation unit, debt and currency options, that the market price, and
      2. for index options, that the current value

      of the underlying interest is below the exercise price of a call option, and above the exercise price of a put option.

      “over-the-counter option”

      A call option or a put option other than an exchange-traded option.

      “premium”

      The aggregate price, excluding commissions and other fees, that the option buyer pays and the option writer receives for the rights under the option contract.

      “put option”

      1. An exchange-traded option that:
        1. for equity, index participation unit, debt and currency options, gives the holder the right to sell and the writer the obligation to buy the underlying interest at a stated exercise price on or before the option expiration date, and
        2. for index options, gives the holder the right to receive and the writer the obligation to pay, if the current value of the index falls below the exercise price, the difference between the aggregate exercise price and the aggregate current value of the underlying interest on or before the option expiration date,
      2. an over-the-counter option that either:
        1. gives the holder the right to sell and the writer the obligation to buy the underlying interest at a stated exercise price on or before the option expiration date, or
        2. gives the holder the right to receive and the writer the obligation to pay, if the current value of the index falls below the exercise price, the difference between the aggregate exercise price and the aggregate current value of the underlying interest on or before the option expiration date.

      “qualifying basket of index securities”

      A basket of equity securities with the characteristics in subsection 5360(4).

      “regular reset date”

      The date after the last reset date if the maximum number of trading days in the regular reset period has passed.

      “regular reset period”

      The normal period between margin rate resets. This period is determined by IIROC and is not longer than 60 trading days.

      “regulatory margin interval”

      IIROC’s regulatory margin calculation determined in accordance with subsection 5360(2).

      “time value”

      An excess of the market value of an option over the in-the-money value of the option.

      “tracking error margin rate”

      The last calculated regulatory margin interval for the tracking error resulting from a particular offset strategy.

      “unit of trading”

      The number of units of the underlying interest that have been designated by an exchange as the minimum number or value to be the subject for a single option in a series of options. If there is no such designation, for a series of options the following rules apply:

      Underlying interest Unit of trading
      (i) equity 100 shares
      (ii)  index participation unit 100 units
      (iii) debt 250 units
      (iv)  index 100 units

      “violation”

      Occurs if the maximum one or two day percentage change in the daily closing prices is greater than the margin rate.

    5131. - 5199.  Reserved. 

    There is no history log for this rule.

    There is no history log for this rule.