settlement Flashcards
settlement for stocks AND BOND
req way T+1
settlement date for muni
reg way T+1
settlement date for Treasuries
T+1
settlement date for options
T+1
cash settlement
same day as the trade
Seller’s Option
If trade settlement cannot be completed on a regular-way or for-cash basis, the
seller may request a seller’s option settlement. At the time of the transaction, both parties to the trade
may agree to a seller’s option, which gives the selling firm additional time beyond the normal two
business days to make good delivery. Often, a seller’s option is used when the seller needs additional
time because of legal requirements, such as the removal of a legend from a stock certificate.
trade settlement is governed by
FINRA’s Uniform Practice Code.
Remember, trade settlement refers to the timing of payment and delivery between member firms
and is governed by FINRA’s Uniform Practice Code
the date on which customer payment must be made is set by
FED
Book-Entry Settlement
Rather than making physical delivery of securities or cash when settling
securities trades, many firms use book-entry settlement. If a firm intends to use book-entry settlement,
all transactions in depository-eligible securities must be settled through a registered securities
depository, such as the DTCC or the National Securities Clearing Corporation (NSCC). For locked in
(affirmed) stock trades, each firm is actually settling the position with the NSCC—the DTCC subsidiary
street-name
The securities may be held in bearer form, book-entry form, or registered in the name of the customer with the firm holding them to provide protection against loss or theft. In many cases, customer securities are held in street-name (in the name of the broker-dealer) to facilitate transfers. When securities are held in street-name, the customer is considered the beneficial owner of the securities. Many times the issuer knows the identity of the beneficial owners of its securities; however, in other cases, the owners may prefer that the issuer not know their identity.
Beneficial Owners
beneficial owners are persons who have security positions that are being held by a financial intermediary (e.g., a broker-dealer or trustee) with which they do business. These positions are typically registered in street name and each individual customer’s ownership is internally recorded on the firm’s stock record.
Non-Objecting Beneficial Owner (NOBO)
If a beneficial owner gives permission to her broker-dealer to release her name and address to the issuer, she is considered a non-objecting beneficial owner. With this information, the issuer is directly able to provide NOBOs with shareholder communications, including proxies and financial filings (e.g., Forms 10-K and 10-Q).
Objecting Beneficial Owner (OBO)
If a client instructs her broker-dealer to keep her personal information confidential, it may not be provided to issuers. In this case, the issuer will distribute the communications in bulk to the broker-dealer. In turn, the broker-dealer will redistribute the material to the objecting beneficial owners.
10-K filings
(annual reports)
10-Q filings
(quarterly reports).
