Unit 19 Settlement SIE

When securities are bought and sold, ownership changes hands between the buyer and the seller

on the settlement date of the transaction. When securities transactions occur, ownership changes hands between the two parties on the settlement date.

Good delivery of a stock certificate requires all of the following except

proper signatures of a firm principal on the certificate. The broker-dealer does not sign the certificate. All the rest of these are requirements.

A document that substitutes for the owners signatures on the back of a stock or bond certificate is called a

stock or bond power. A stock (or bond) power signed by the owners may be used in lieu of the customer's signature on the back of the certificate.

James Thomas calls and is interested in buying some GNMA certificates and wants to know when payment will be due. You should tell him

trade date plus 2 business days. Regular way settlement is T + 2 for everything except treasuries, money market securities, and options.

Regular way settlement for common stock is

trade date plus 2 business days. Regular way settlement is T + 2 for everything except treasuries, money market securities, and options.

Your client is purchasing XYZ corporate bonds and wants to know when regular way settlement is. You should tell her

trade date plus 2 business days. Regular way settlement is T + 2 for everything except treasuries, money market securities, and options.

Your client, Alice Tate, lives in Irvine, California, and wishes to purchase some bonds that would be both state- and federal-tax free for her. You recommend some school district bonds from Costa Mesa. She then asks when she would need to pay for the bonds. You should tell her

trade date plus 2 business days. Regular way settlement is T + 2 for everything except treasuries, money market securities, and options.

Your client is buying municipal bonds and wants to know when payment is due. You should tell him

trade date plus 2 business days. Regular way settlement is T + 2 for everything except treasuries, money market securities, options.

Isaac James has some call options in his account that he would like to exercise. He wants to know when the resulting purchase of the stock would settle. You would tell him

trade date plus 2 business days. When purchasing or selling an option, the settlement is the next business day. When an option is exercised the resulting stock transaction is 2 business days following exercise.

physical paper certificates

what securities are issued with; certificates that are required for physical delivery

Your customer has purchased $10,000 in U. S. Treasury bonds. These securities

will have evidence of ownership recorded in book-entry form. All U.S. government securities no matter what the denomination or amount are delivered, transferred, and have ownership recorded in book-entry form.

Which of the following settlement arrangements has trade and settlement occurring on the same day?

Cash settlement If both parties to the trade agree, and if the buyer has the cash on hand and the seller has the securities on hand, trade and settlement can take place on the same day. This is known as cash settlement.

On Tuesday, December 10 your customer Bought 5 OEX (S&P 100 Index) 230 March calls at four. On Tuesday, March 10 the calls are in-the-money and your customer issues exercise instructions. On what days did the trade and the exercise settle?

December 11 and March 11 All option trades settle next business days. The exercise of an Index option settles the next business day.

A stock trade took place on Tuesday, July 2. When would regular way settlement normally take place?

Friday, July 5 Regular way settlement for a stock trade is T + 2 (trade date plus two business days). This would normally make settlement for this transaction Thursday July 4, but because July 4 is not a business day (national holiday), regular way settlement would have to be Friday, July 5.

On Friday, July 1 your customer purchased 10 3% T-bonds maturing in 15 years. This trade will settle on

July 5 Treasuries settle T+1 (next business day after the trade). A trade on Friday would normally settle on Monday, but this Monday is a holiday (Independence Day). Remember the July 4 and December 25 are not settlement days.

good delivery

Meaning that a certificate has the necessary endorsements and meets all other requirements (signature guarantee, proper denomination, and other qualifications), so that title can be transferred by delivery to the buying broker, who is then obligated to accept it.

what has to happen to the settlement at the end of the day?

The BD representing the seller receives the cash due the seller and the BD representing the buyer receives the securities due the buyer in good order

Ron buys 522 shares of Narcissus Inc., common stock in a cash account on Monday, March 19. He deposits cash in the account sufficient to cover the trade on March 20. How soon would he be able to withdraw those shares?

Wednesday, March 21 This is a regular way settlement of a corporate security (T+2). The trade is fully paid for so the customer may request the shares be moved on or after settlement on Wednesday, March 21.

Your customer buys 300 shares of Steel Tools common stock on Tuesday and will be an owner of record as of the close of business that same Tuesday. This must be

a cash settlement trade. This is called a cash settlement trade. It states that the trade is a common stock, so not a mutual fund. There is no formal quick settlement trade.

A term indicating that a security is tradable and all of the requirements of the contract to sell the security have been met and the security is ready to be transferred is

good delivery. To make settlement, good delivery must be made. Good delivery means that all the conditions of the contract have been met.

Shares held in electronic form at a clearing house under a broker-dealers account are

held in street name. Shares held in street name are normally registered to the broker-dealer, who hold them on behalf of the client at the broker-dealers clearing firm.

A signature endorsement on a stock certificate would not be required for good delivery if the shares were

held in street name. Shares held in street name are normally registered to the broker-dealer, who hold them on behalf of the client. As these shares are likely only in electronic form no signature is required to transfer them.

Nate McCann is closing on a house tomorrow and wants to sell some securities to meet closing costs. He wants to know how soon he could get the money and what he needs to do. You should tell

if he does the trade today for cash settlement he could settle today. Cash settlement is same day settlement.

A trade of an equity option settles in ( ) days, while an exercise of an equity option must be completed in ( ) days.

1,2 An option trade settles next business day (T+1); the exercise of an equity option settles in two days from exercise.

Some issuers issue securities in electronic form, while some securities have been issued in physical form. Which of the following statements are true in relation to electronic or physical form?

All U.S. government securities are issued in book entry form Since the mid-1980s, all government securities have been in electronic form. All of the paper certificates have matured. Historically, corporate securities were issued in paper form and some still exist, but most of the bonds have matured that were issued in physical form. Some investors still hold paper stock certificates. Virtually all new securities are now issued in electronic form (book entry).

cash settlement

the cash value of the underlying asset (rather than the asset itself) is delivered to satisfy the contract requires delivery of the securities from the seller and payment from the buyer on the same day a trade is executed. both parties have to agree on a cash settlement

Settlement

the process that ensures that both parties to a transition receive what they are supposed to receive; money to the seller and securities to the buyer trade is executed; begins this process;

A cash settlement trade settles

the same day as the trade. A cash settlement trade settles the same day as the trade. A cash trade is a trade that occurs in a cash account (meaning no margin).

equity option exercise

the transaction must be completed by the second business day (T+2) after the exercise

Index option

there is no underlying security to deliver

Josie Reese, one of your clients with an option account, calls and asks you to remind her when she is required to settle if she bought a call today.

trade date plus 1 business day. Options settle the next business day (T + 1). Regular way settlement is T + 2 for everything else except treasuries and money market securities.

Your client, Teresa Jenson, calls and wants to purchase T-bills and wants to know when payment is due. You should tell her

trade date plus 1 business day. Regular way settlement is T + 2 for everything except treasuries and money market securities. Options treasuries and options settle next business day (T + 1 ).