14. Proper Booking and Settlement of Trades Flashcards
Issuers who pay a cash dividend with a fraction of a cent (e.g. a 10 and quarter cent dividend, $0.1025) will result in the dividend _______ to the nearest ________ in all cases (i.e. $0.1025 would be a dividend of ______), and that rounded dividend would be removed from the opening price on the _________
rounding up
Whole cent
$0.11
Ex-date
E.g., stock trades at $20.00 per share and issues a $0.1025 dividend. On the ex-date that dividend would be registered as $0.11 and the stock would open for trading on the ex-date at $19.89
On the ex-date, each of 1) _______, 2) _______ and 3) ______ are all reduced by the amount of the dividend (rounded)
1) price of the stock
2) buy limit orders
3) sell stop orders
For a trade executed prior to the ex-date but the securities are delivered AFTER the record date (settlement date) a _____ must be delivered with the securities
a “due bill”
This will ensure that the buyer received proper credit for the dividend
Short sales & dividends:
Who receives a dividend if a short sale is executed PRIOR TO the ex-date?
the buyer receives a dividend from the ISSUER
And
The lender receives a dividend from the BORROWER
Short sales & dividends”
Who receives a dividend if a short sale is executed ON / AFTER the ex-date
The lender receives a dividend from ISSUER
And
The borrower does NOT receive a dividend
True / false: any open orders in a security that later become subject to a REVERSE SPLIT will be maintained
false - they will be cancelled
Under Reg SHO/FINRA, a fail to deliver in a threshold security must be closed out after _________. The close out occurs on ______
13 consecutive settlement (business) days
The morning of the 14th settlement day
An ________ must include whether an order was entered on a solicited, unsolicited or discretionary basis
order ticket
True / false: an order ticket / memo contains a CUSIP
false - CUSIP only on trade confirmation
At or before settlement of a trade, a customer receives a _______
Trade confirmation
Under the Uniform Practice Code (UPC), equities are normally settled ______
T+1
Under the Uniform Practice Code (UPC), cash settled trades are settled ________
same day
Under the Uniform Practice Code (UPS), trades settled at “seller’s option” are settled ___________
On any business day after t+1 with at least one day prior notice
These are securities where offering date, price (IPO) and coupon (debt) have not yet been finalized
when issued (WI) securities
The ______ is the first date a security trades without the dividend included in the contract price (i.e., a buyer on or after this date will NOT receive the dividend)
Ex-dividend date or ex-date
NOTE - this is set by exchanges (normally the record date)
A _______ is a sale of stock that the client does not own
a short sale
Under Reg SHO, to accept a short sale order, the BD must “locate” (Locate Requirement) the shares that will be borrowed and delivered on settlement via _____________ or ____________
definitive borrowing agreement - an agmt between BDs and large institutional investor that allows the BD to borrow securities from the institution’s portfolio
Available securities list (updated every 24 hours) - list that the BD has identified as reasonably available
How must clearing / carrying firms report short interest?
1) must report GROSS short interest positions in its proprietary (house) and customer accounts
2) TWICE per month (15th and last trading day)
3) and most be reported by 6pm est the SECOND business day after such reporting dates
Three exceptions to the Locate Requirement (under Reg SHO) are
1) sale by a BD in which order marked “long” and BD has no reason to know sale is short (reasonable belief)
2) Sale by a BD to offset customers’ odd lot orders (less than 100 shares)
3) bona fide market making or block positioner activities
Under Reg SHO, in a short sale (at clearing agency) the deadline to close out a failed position is _______ and the responsibility is with __________
S+1 (one business day after settlement, BEFORE open)
Failing Party
Under Reg SHO, in a long sale (at clearing agency) the deadline to close out a failed position is _______ and the responsibility is with __________
S+3 (three business days after settlement, BEFORE open)
Failing Party
Under SEC rules, in a customer delivery to a BD transaction the deadline to close out a failed position is ______ and the responsibility is with ______
After 10 business days from settlement BEFORE open
The broker-dealer
