Series 62

Brokerage Office Procedure - Corporate And Municipal Securities Settlement Options

Regular way transactions in corporate stocks and bonds and municipal bonds settle on the third business day or T+3. There are, however, times when either party to the transaction may request an alternative settlement. Other settlement options include:

  • Cash
  • Next Day
  • Seller’s Option
  • Buyer’s Option
  • RVP / DVP / COD

Cash: A transaction done on a cash basis settles the same day. A cash trade requires that the buyer have the funds available for payment and the seller to have the securities available for delivery on the day the trade is executed. Cash trades executed prior to 2:00 PM settle by 2:30 PM. Trades executed after 2:00 PM settle within 30 minutes.

Next Day: A transaction executed for a next day settlement requires that the buyer has the cash available for payment and the seller has the securities available for delivery on the next business day.

Seller’s Option: A seller who wishes to lock in a sale price for the securities but who, for some reason is not able to deliver the securities, may elect to specify a seller’s option settlement. The seller may specify the date on which they will deliver the securities but may not deliver the securities any sooner than the fourth business day. If the seller wants to deliver the securities earlier then specified in the contract, they must give the buyer one day written notice of their intention to settle the trade early.

Buyer’s Option: A buyer may specify the date when they will make payment for the securities and accept delivery of the securities, much the same as a seller’s option.

RVP / DVP / COD

Many trusts and other fiduciaries will not allow cash to be paid out until the securities they purchased are delivered. Alternatively, in the case of a sell, they will not allow the securities to be delivered until payment is received. A bona fide RVP / DVP account will allow the transaction to settle no sooner than regular way of T+3 but no later than 35 calendar days. The account is given up to 35 days to settle the transaction. In the case of a purchase, the securities have to be registered in the buyer’s name by the transfer agent and delivered.




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