SIE Unit 19

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

on the settlement date of the transaction.

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

Cash settlement

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.

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.

Regular way settlement for common stock is

Regular way settlement is T + 2 for everything except treasuries, money market securities, and options.

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

T + 1

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

T + 1 Because it is a Treasury

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

Tuesday, April 6 For corporate securities, regular way settlement is the trade date (Friday, April 2) plus 2 business days; therefore, the trade will settle on Tuesday, April 6.

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.

Good delivery

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 **Means that all the conditions of the contract have been met.

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

** T+2 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.

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.

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.

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.

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, 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. Option trades and treasuries settle next business day (T + 1 ).

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

trade date plus 2 business days.