MONTREAL EXCHANGE. MONTREAL EXCHANGE. Term Paper ID:24398 Essay Subject: History, organization, trading services, role in Canadian Stock Market, effect on Quebec, innovation.... 6 Pages / 1350 Words 5 sources, 8 Citations, APA Format 24.00 Paper Abstract: History, organization, trading services, role in Canadian Stock Market, effect on Quebec, innovation.Paper Introduction: Introduction Companies have two methods which they can use to raise capital: they can borrow funds from banks or other investors (debt financing), or they can offer shares in their operations (equity financing).
When companies offer shares to the public, they are inviting investors to participate in the operation of the company and share in the risk--and the reward--of the company's activities. Small companies are often very close to their investors, with major stockholders often serving as key executives in the firm. Once a company issues stock, however, it loses control of that ownership.
Individuals can sell the stock to each other without the company's permission, and some investors purchase shares in companies without being interested in the daily operations of the organization. Over time, stock markets have evolved to fa Some of these stock markets are quite large, such asthe New York Stock Exchange and the Nikkei (Tokyo) Exchange; information onthese exchanges is found on the evening news. Effect of Montreal Exchange on Quebec During its initial years, the Exchange had a significant effect on theeconomy of Quebec. C24). C.
From this standpoint, the exchange must be viewed as adynamic and critical part of the Canadian economy. The link toBoston enabled Montreal members to place orders for American issues throughthe Intermarket Trading System, an innovation which ensured members thebest possible price (Montreal Stock Exchange, 1997b, p. The buy order is matched to asell order at the same price, and the transaction is then registered.
In 1984, the CanadianMarket Portfolio Index was introduced during the same period that theExchange established a link to the Boston Stock Exchange. The individual must also be registered with theCommission des valeurs mobilieres du Quebec, the agency responsible forcontrolling the securities industry in the province (Montreal StockExchange, 1997a, p. In 1965, the Exchange implementedcomputers and information management systems which exceeded thecapabilities of the other Exchanges of the period. (199 , July).
Introduction Companies have two methods which they can use to raise capital: theycan borrow funds from banks or other investors (debt financing), or theycan offer shares in their operations (equity financing). Because ofcomputers, information about trades can be communicated around the world ina matter of seconds. More than 17 million shares are traded daily, and morethan 3.4 million futures contracts and 834, options were traded during1996 (Montreal Stock Exchange, 1997a, p. Euromoney, pp.
As a regional exchange, Montreal has successfully positioned itself asthe center of the derivatives industry in Canada, although that industryhas proven particularly troublesome in the United States as unsophisticatedspeculators have lost considerable sums with these instruments. Nonetheless, Montreal has created a niche for itself that complements theCanadian stock market as a whole and has proven itself a leader inintroducing the technological innovations which are integral to today'sglobal economy. The market is set up so that client orders aretraded from a single central market supply in which prices are established.
To be anindependent trader, an individual must be at least 18 and a Canadiancitizen or legal resident and pass all exams set up by the Exchange forthis purpose. 64).
The Montreal Exchangefostered such growth in the Quebec region and, since it was the firstexchange in Canada, helped build a financial infrastructure whichfacilitated the economic success of the region (Michie, 1988, p. Conclusion Since its beginning, the Montreal Exchange has been in the forefrontof innovation within the Canadian securities industry. This is true from atechnological perspective, whether viewed from the introduction of ticker-tape or the introduction of on-line trading, as well as from aphilosophical perspective as the Exchange participates in derivatives andother new products. 3).
History of the Montreal Exchange The Montreal Exchange, the first such exchange in Canada, wasincorporated in 1874, two years after the Board of Brokers and the CornExchange joined together. Innovation has also extended to the investment strategies supported bythe Exchange.
By 192 , volume hadincreased to three million shares, and, by 1926, a second, parallel markethad emerged for issues which were judged too young or too speculative forthe Montreal Exchange. Individuals can sell the stock to each other without thecompany's permission, and some investors purchase shares in companieswithout being interested in the daily operations of the organization. Small companies are often very close to theirinvestors, with major stockholders often serving as key executives in thefirm.
A company which wants to be listed on the Montreal Exchange must meeta series of requirements regarding financial stability, development stage, strength of management and other criteria. Organization of the Montreal Exchange The Montreal Exchange is part of the larger Canadian Stock Market, which includes exchanges in Toronto, Vancouver, Albert and Winnipeg inaddition to Montreal.
8). In 1996, the Montreal Exchange was the 11th largest inthe world, with more than 55 listed companies and 638 billion in totalcapitalization. C24-C25.
(1997). (1997). During the first year, the Exchange listed 63issues, with an average trading volume of 8 shares. Since the mid-198 s, the Montreal Exchangehas emerged as a leader in Canadian derivative products, an area whichgained increased acceptance following the crash of 1987. The Montreal Exchange is composed of more than 8 member brokeragefirms whose representatives conduct the actual trading.
6). Montreal Stock Exchange. Michie, R.
Following World War II, the Exchange encouraged option plansfor stock purchases, collective retirement plans, mutual funds, and thecreation of investment clubs. Gibbons, R. The Exchange wasalso approved by the American Commodity Futures Trading Commission as a wayfor American investors to negotiate options on precious metals; this wasthe first time that a merchandise options market was so approved without anegotiating link to an American exchange (Montreal Stock Exchange, 1997b, p.
Issues on the exchange suffered during the recent referendum onsecession by Quebec. In addition, the individual must have a net worth of atleast 25, and an agreement with an accredited clearing house tofacilitate trades. This central market generates quotes for all buyers and sellers based onsupply and demand. History.
Since the Montreal Exchange is located in Quebec and, since it is an important part of the world economy, people speculated aboutthe future of the exchange if Quebec seceded from Canada. 17. However, many regionalexchanges serve smaller communities and are an important part of theinternational economy. 35-73.
The Montreal Exchange trades stocks and bonds as well as futurescontracts and options on each of these. Once an investor decides which securities to purchase, he communicateshis decision to his broker, who places the order in the computer systemelectronically or through a floor trader. This parallel market traded on the sidewalk outsidethe exchange and was thus known as the Curb Market; in 1953, the CurbMarket formally became the Canadian Exchange, which merged with theMontreal Exchange in 1974 (Michie, 1988, p. In addition, exchanges serve as financial focal pointsfor companies and investors and can create a need for additional financialservices, such as banks and clearing houses.
Business History Review, pp. Stock exchanges bring increased financial activity toan area because of the jobs they bring for brokers and others associatedwith the exchanges. FinancialTimes, p. Once a company issues stock, however, it loses control of thatownership. Independenttraders can hold restricted permits which enable them to carry outtransactions for themselves only on the floor of the Exchange; theseindependent traders cannot conduct transactions on behalf of any otherindividuals or groups without obtaining broker status.
That speculationhas quieted for the time being but is likely to resurface when thesecession issue comes up for a vote again (Gibbens, 1996, p. (1988, Spring).
Montreal Stock Exchange. Frequently asked questions. Internet address: http://www. me.