Good Delivery
The goal of executing a trade is to ensure good delivery - assurance that a security meets all the standards required to transfer title to the buyer. This means that a certificate has been delivered on the settlement date with proper denomination (round-lot), endorsements and endorsement guarantee.


Exam Tips and Tricks
Are mutilated certificates ever considered good delivery? The answer is yes, only if authenticated by the issuer\'s transfer agent.


Good delivery applies to both stocks and bonds. Transactions in book-entry securities - in which the issuer keeps a record of who has purchased its securities but does not physically deliver them - are usually cleared automatically.

  • Stocks - These securities must be transferred in round-lots. A round lot is generally 100 shares of stock. Anything less than this amount is considered to be an odd lot.

    • So, what happens if a customer has placed an order for 90 shares? For one, that customer will most likely incur an odd lot differential, which is essentially a extra fee on top of regular transaction costs. Secondly, the broker-dealer might bunch the order together with one or more other odd-lot orders for the same security in order to process the transaction as a round-lot and reduce their client's fees. (Note that the broker-dealer must ask permission in order for bunching to occur).

  • Bonds - These securities must be delivered in face value denominations of $1,000 or $5,000.

Broadly speaking, there are two ways to buy securities:

  1. in the primary market, meaning the securities are issued directly by the corporation or agency seeking to raise funds, or

  2. in the secondary market, meaning the securities are now being bought and sold by investors.


Look Out!

This distinction determines how and when securities and money change hands. The following discussion focuses on equities and private-sector bonds covered by the FINRA\'s Uniform Practice Code.


When, As, and If Issued (WI)
In the primary market, securities often trade when, as, and if issued, often abbreviated WI.

  • A trade is done on WI because there are no physical certificates available reflecting the securities being traded, so a delivery date cannot be determined at the time of execution.

  • The coupon rate on a bond is not finalized until the offering date, and the exact price and initial public offering date of a stock often are not determined until the bulk of the buyers are already lined up.

  • In either event, the securities trade WI until all details are settled and the offering date arrives. A "when issued" settlement date is established through contact with the company or its agent, which determines that there is a sufficient market for the securities to be issued.
Settling Transactions In The Secondary Market

Related Articles
  1. Insurance

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  2. Financial Advisor

    How Brokers Are Compensated for Selling Bonds

    Find out how brokers are paid for selling bonds and how the transaction costs are passed on to the investor through a markup or commission.
  3. Investing

    Explaining Market Orders

    A market order is the most common order used to purchase a financial security.
  4. Financial Advisor

    7 Questions to Consider Before Investing in Bonds

    There is a significant number of questions every investor, private or institutional, should consider before investing in bonds.
  5. Financial Advisor

    The Issuance Procedure of Corporate High-yield Bonds

    Issuing debt over equity can have several advantages for companies. Here we have a detailed look on the issuance procedure of corporate high-yield bonds.
  6. Investing

    Old Stock Certificates: Lost Treasure Or Wallpaper?

    What if you've discovered some old shares in bearer form? Follow our tips and find out what they're worth.
  7. Investing

    What Does a Transfer Agent Do?

    Transfer agents maintain the records and documents related to shareholder accounts.
  8. Investing

    What is the Secondary Market?

    The secondary market is where investors purchase securities or assets from other investors, rather than from the issuing companies themselves.
  9. Investing

    Corporate Bonds: Advantages and Disadvantages

    Corporate bonds can provide compelling returns, even in low-yield environments. But they are not without risk.
Frequently Asked Questions
  1. Who are Whole Foods' (WFM) main competitors?

    Whole Foods' main competitors are Sprouts Farmers Markets and Trader Joe's. However, the recent acquisition by Amazon my ...
  2. What caused the Stock Market Crash of 1929 that preceded the Great Depression?

    Find out what led to the stock market crash of 1929, which in turn led to the Great Depression. It sparked a nearly 90% loss ...
  3. How does inflation affect the exchange rate between two nations?

    Inflation is closely related to interest rates, which can influence exchange rates. Countries attempt to balance interest ...
  4. What are some examples of free market economies?

    In a free market economy, the law of supply and demand, rather than a central government, regulates production and labor. ...
Trading Center