Life Cycle of a Trade – IIROC


Hi! Ever wondered how all the different
components of a trade fit together? There’s a well-oiled machine that
processes literally hundreds of thousands of trades every day in Canada!
The trade begins with you the investor. You may want to buy or sell shares of a
company. Once you’ve decided what you want to do, the process begins…
All orders to buy or sell shares have to be placed with a dealer registered with the
Investment Industry Regulatory Organization of Canada or IIROC. You call
an advisor at the IIROC dealer to place your order. In some cases, you can place
the order directly through an online account at the IIROC dealer. Once your
order has been accepted by the IIROC dealer, the IIROC dealer will send your
order to a regulated marketplace to execute. In Canada, marketplaces include
both Exchanges and Alternative Trading Systems. Both types of marketplaces are
where IIROC dealers go to place their client’s orders to buy and sell
securities. Once your order is matched, the order has been “executed” and
officially becomes a trade. Now the trade gets sent to the Clearinghouse. The
central clearinghouse is like a post office responsible for the delivery of
stocks and the delivery of payments. All Exchanges and Alternative Trading
Systems in Canada use the same single central clearinghouse. For each trade the
Clearinghouse will ensure the has sent payment and the seller has
delivered shares. So essentially, the clearinghouse takes the cash from the
buying IIROC dealer and the securities from the selling IIROC dealer and gives
the cash to the selling IIROC dealer and the shares to the buying IIROC dealer.
Each dealer will then allocate the shares or cash to their respective
clients’ accounts. In Canada, this process is standardized so that the
movement of cash versus securities is completed two days after the execution.
That, in a nutshell, is the life cycle of a trade. So where does IIROC come in?
IIROC monitors the activities of ALL IIROC dealers, their investment advisors and
traders in Canada. IIROC also monitors all equity trading in real-time using
sophisticated surveillance technology. We make sure that your cash and securities are protected and the IIROC dealer and their investment advisers comply with our
rules and that trading on the marketplaces is fair for everyone.

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