Section 6, Settlement Dates, Depositories And Clearing Companies

What is regular way settlement for common stock, preferred stock, corporate bonds, municipal bonds, government bonds, and options?

Delivery occurs 1 business day after the trade (T+1).

What is the typical settlement for most securities under Regulation T?

3 business days after the trade (T+3).

Can a customer request early payment of sale proceeds in a regular way transaction?

No, the customer cannot request early payment in a regular way transaction.

What is the settlement for cash transactions on the NYSE?

Cash trades executed at or before 2:00 p.m. settle by 2:30 p.m.; trades after 2:00 p.m. settle within 30 minutes of execution.

Who determines the settlement date for “When, As, and If Issued/Distributed” transactions?

FINRA’s Uniform Practice Code Committee (FINRA Rule 11130).

What are the two forms of settlement for financial instruments?

Physical delivery and book-entry (electronic) settlement.

What is the Depository Trust Clearing Company (DTCC)?

One of the world’s largest securities depositories that reduces costs and provides electronic clearing and settlement of securities.

What is the National Securities Clearing Corporation (NSCC)?

A subsidiary of DTCC providing centralized clearing, information, and settlement for broker-dealers, banks, mutual funds, and insurance companies.

What is Continuous Net Settlement (CNS)?

An automated NSCC system that centralizes and matches settlement of trades and money balances, eliminating direct “window” settlement.

What is the Fixed Income Clearing Corporation (FICC)?

A DTCC subsidiary that clears and settles government securities, repurchase agreements, and mortgage-backed securities.

What is the Federal Deposit Insurance Corporation (FDIC)?

A federal agency that insures deposits in banks and thrifts up to $250,000, but does not insure securities, mutual funds, or insurance products.

Regular Way Settlement

Standard settlement where common stock, preferred stock, corporate bonds, municipal bonds, government bonds, and options are delivered 1 business day after the trade.

Regulation T Settlement

Most securities settle 3 business days after the trade.

Cash Settlement

Settlement of a transaction on the same day it is executed; NYSE cash trades at or before 2:00 p.m. settle by 2:30 p.m., after 2:00 p.m. within 30 minutes.

Physical Settlement

Settlement satisfied by delivering the actual security or commodity.

Book-Entry Settlement

Electronic settlement of securities or financial instruments without physical delivery.

Depository Trust Clearing Company (DTCC)

Large securities depository providing safekeeping, electronic transfer, and clearing services for the financial markets.

National Securities Clearing Corporation (NSCC)

DTCC subsidiary providing centralized clearing, information, and settlement for broker-dealers, banks, mutual funds, and insurance companies.

Continuous Net Settlement (CNS)

NSCC system that automates settlement of securities trades and money balances, eliminating direct delivery between buyer and seller.

Fixed Income Clearing Corporation (FICC)

DTCC subsidiary for clearing and settling government securities, repurchase agreements, and mortgage-backed securities.

Federal Deposit Insurance Corporation (FDIC)

Independent federal agency that insures deposits in banks and thrifts up to $250,000, but does not cover stocks, bonds, mutual funds, or insurance products.