Chapter 4 - Good Delivery Rules

Question 1

Unit Delivery Rule

Answer 1

For round-lot sales of common stock, delivery must be made in denominations that add up to 100 shares or are divisible by 100 shares

Question 2

Partial Deliveries

Answer 2

A partial delivery is acceptable under Uniform Practice Rules if the amount remaining to be delivered does not include an odd lot.

Delivering 250 shares would not be good delivery, because the remainder would be an odd lot

.

Question 3

Each delivery of bearer bonds must be in denominations of ?

Answer 3

Each delivery of bearer bonds must be in denominations of $1,000 or $5,000

Question 4

For registered bonds, delivery must be in denominations of:

Answer 4

For registered bonds, delivery must be in denominations of $1,000 or multiples thereof ($5,000, $10,000, $25,000, et cetera) but in no event in a denomination larger than $100,000.

Question 5

T/F - if the issue is subject to an in-whole call, delivery of any certificate is good delivery ?

Answer 5

If a bond issue has become the subject of a partial call, delivering certificates subject to the call is not good delivery (unless identified at time of trade as being called bonds). Rather, it is presumed that the buyer wants to buy bonds not subject to the call. However, if the issue is subject to an in-whole call, delivery of any certificate is good delivery. The only bonds the seller can deliver are ones subject to the call.

Question 6

“and interest”

Answer 6

The majority of bonds trade and interest , which means that the buyer pays the seller the market price of the bond plus any interest accrued since the previous interest payment date.

Because the buyer will receive the full amount of the next interest payment (including interest that accrued while the seller still owned the bond), the seller must be reimbursed for that portion of the interest.

Question 7

In computing accrued interest for corporate bonds, each month is assumed to have how many interest days ?

Answer 7

In computing accrued interest for corporate bonds, each month is assumed to have 30 interest days.

Question 8

Accrued interest is calculated from ….

Answer 8

Accrued interest is calculated from (including) the prior interest payment date—the last coupon date—up to (but not including) the settlement date. The buyer owns the bond on the settlement date, which means that the interest for that day belongs to the buyer.