Unit 19: Settlement

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

on the settlement date of the transaction.

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

proper signatures of a firm principal on the certificate.

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

stock or bond power.

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.

Josie Reese, one of your clients with an option account, calls asking you to remind her when she would settle if she bought a call today. You would tell her

trade date plus one business day.

Your client Mr. Jenson calls and wants to purchase T-bills and wants to know when payment is due. You should inform him

trade date plus one business day.

Your client, Jacob Riley, wants to purchase Treasury bonds and asks when he would need to pay for the bonds. You would inform him that regular way settlement for U.S. Government Bond is

trade date plus one business day.

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

trade date plus two business days

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 two business days.

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

trade date plus two business days.

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

will have evidence of ownership recorded in book-entry form.

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

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

Nate McCann is closing on a house tomorrow and wants to sell some securities to meet closing cost. He wants to know how soon he could get the money and what he needs to do. You could tell him which of these?

If he does the trade today for cash settlement he could settle today.

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

July 5

A corporate stock is purchased on Friday, April 2, regular way. When will the trade settle?

Tuesday, April 6

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

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.

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.

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

held in street name.

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.

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

1 , 2

Some issuers issue securities in electronic form, 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.

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

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.

A cash settlement trade settles

the same day as the trade.

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. You would tell her

trade date plus 1 business day.

Your client, Jacob Riley, wants to purchase Treasury bonds and asks when he would need to pay for the bonds. You would tell him that regular way settlement for U.S. government bonds is

trade date plus 1 business day.

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 for common stock is

trade date plus 2 business days.

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

trade date plus 2 business days.