Apply Settlement And Delivery Rules - Series 7

Which term describes settlement through electronic records without paper certificates for most securities?

Book-entry settlement. Book-entry uses electronic records for efficiency, eliminating the need for physical certificates in modern trading.
Which option best defines "registered" versus "bearer" form in the context of delivery and transfer?

Registered: owner on books; Bearer: holder is owner. Registered form records ownership officially, while bearer form presumes ownership by possession for transfer ease.
What is the minimum par amount for a corporate bond to be considered good delivery (and in what increments)?

$1,000$ par or multiples of $1,000$ . Corporate bonds standardize at $1,000 par to facilitate trading and good delivery in multiples.
What is the minimum par amount for a municipal bond to be considered good delivery (and in what increments)?

$5,000$ par or multiples of $5,000$ . Municipal bonds use $5,000 as the base denomination for consistency in issuance and secondary trading.
Identify whether a $10,000$ municipal bond certificate is good delivery under standard municipal denominations.

Good delivery ( $10,000$ is a multiple of $5,000$ ). $10,000$ meets good delivery standards as it represents two units of the $5,000$ municipal bond denomination.
Identify whether a $2,000$ corporate bond certificate is good delivery under standard corporate denominations.

Good delivery ( $2,000$ is a multiple of $1,000$ ). $2,000$ qualifies as good delivery since it equals two $1,000$ units, the standard for corporate bonds.
Identify whether delivery of $100$ shares of stock is a good delivery unit under standard equity delivery rules.

Yes, it is a round lot (good delivery unit). 100 shares constitute a standard round lot, meeting equity good delivery requirements for certificates.
Which settlement cycle applies to most corporate and municipal securities trades in the secondary market?

Regular-way: $T+1$ . The SEC implemented T+1 settlement for most corporate and municipal securities in 2024 to reduce market risk and enhance capital efficiency.
Which term describes a trade that settles by physical delivery of certificates rather than book-entry?

Physical delivery (certificate delivery). Physical delivery involves transferring actual certificates, used when book-entry is not applicable.
What is "receipt versus payment" (RVP) for a customer sale in a cash account?

Payment made only upon receipt of securities. RVP protects sellers by guaranteeing payment release only after securities are received.
Which settlement cycle applies to U.S. Treasury securities trades in the secondary market?

Regular-way: $T+1$ . U.S. Treasury securities align with the T+1 regular-way cycle to standardize settlement and minimize counterparty exposure.
What does "good delivery" generally require regarding the condition and negotiability of a security certificate?

Properly endorsed, negotiable, and in acceptable condition. Good delivery mandates certificates be endorsable, transferable, and free from damage to ensure valid transfer.
Which option best defines a "when-issued" security trade settlement timing?

Settles when the securities are issued and delivered. When-issued trades settle upon the security's issuance, aligning with the actual availability of the instrument.
Identify whether a $7,000$ municipal bond certificate is good delivery under standard municipal denominations.

Not good delivery (must be $5,000$ multiples). $7,000$ fails good delivery as it does not conform to required multiples of $5,000$ for municipal bonds.
What is the settlement cycle for a seller's option trade when the contract specifies a future settlement date?

Seller's option: settles on the specified date. Seller's option allows the seller to choose a delayed settlement date up to 60 days for flexibility in delivery.
What does the trade date symbol $T$ represent in a settlement cycle such as $T+1$ ?

$T$ is the date the trade is executed. T denotes the execution date, serving as the baseline for calculating settlement timelines in trading cycles.
Which option best states the standard good delivery unit for equity securities delivered via certificate?

Round lots: $100$ shares per unit. Equity certificates use 100-share round lots as the standard unit to ensure efficient delivery and trading.
What is the settlement method for a trade done "regular way" versus "cash" in terms of payment timing?

Regular-way: $T+1$ ; Cash: $T$ . Regular-way delays payment to T+1 for processing, while cash requires immediate same-day exchange.
What is the settlement cycle for a cash trade (cash settlement) unless otherwise specified?

Cash settlement: same day ( $T$ ). Cash settlement mandates same-day completion to facilitate immediate transfer of securities and funds.
Identify the settlement date for a regular-way trade executed on Monday when the cycle is $T+1$ .

Tuesday (next business day). T+1 requires settlement on the next business day following execution, excluding weekends and holidays.
What is "delivery versus payment" (DVP) for a customer purchase in a cash account?

Securities delivered only when payment is made. DVP ensures securities are transferred only after payment confirmation to mitigate settlement risk.
Which event fixes the settlement date for a municipal or corporate bond trade under regular-way settlement?

The trade date plus $1$ business day ( $T+1$ ). Settlement is determined by adding one business day to the trade date under standard regular-way rules.
What is the standard settlement cycle for listed and OTC equity trades under regular-way settlement?

Regular-way: $T+1$ . Listed and OTC equities follow T+1 under regular-way rules as per SEC regulations to streamline clearing processes.
Identify the settlement date for a $T+1$ trade executed on Friday (assume no market holidays).

Monday (next business day). Settlement occurs on the subsequent business day under T+1, rolling over weekends to the next available weekday.

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