DEFINITION of 'Due Bill Period'

In the context of corporate actions, such as the issuance of dividends, due bill period is the time during which due bills are used.

A due bill documents and clarifies a stock seller's obligation to deliver a pending dividend or another form of payment to the stock's buyer. Due bills are also used in other types of events, such as the issuance of rights and warrants, and stock splits.

BREAKING DOWN 'Due Bill Period'

Due bills function as promissory notes and ensure that the correct owner receives a stock's dividend when the stock trades near its ex-dividend date (ex-date). They are helpful during this interim period when trades are still settling. This period often extends from one day after the record date to one day after the ex-date, when payment is due.

In the past, security transactions were done manually rather than electronically. Investors would have to wait for the delivery of a physical security (in certificate form) and would not pay until the reception. Since delivery times could vary and prices could fluctuate, market regulators required parties to deliver the securities and cash in a set period of time. Settlements are far more streamlined today, with the due bill period helping clarify the process.

For certificates of deposit (CDs) and commercial paper, the transaction settles on the same day; for U.S. Treasuries, it is the next day (T+1), while foreign exchange or forex transactions settle in two days (T+2).

Clearing brokers are exchange members, who help ensure that trades settle appropriately and transactions are successful. Clearing brokers are also responsible for maintaining paperwork associated with the clearing and executing of a transaction.

New Canadian Initiative for the Due Bill Period

In 2017, the Canadian securities industry embarked on a new initiative, called "due bill" tracking, to improve tracking in client accounts for major corporate events like stock-splits or spin-offs. The goal of the initiative was to standardize this practice across Canada and U.S. and improve valuation reporting.

Canada hopes that better due bill processing will result in more accurate and timely reporting and eliminate errors that occur from a manual process. For inter-listed securities between Canada and the U.S., Canada hopes the new process will avoid confusion.

The industry will typically use due bills when a security announces a distribution representing 25% or more of the value of its listing. Ordinary dividends will not likely have due bills attached, and their ex-dates will continue to be two days prior to the record date.

 

RELATED TERMS
  1. Ex-Date

    The ex-date, or ex-dividend date, is the date on or after which ...
  2. Bill Of Sale

    A bill of sale is a formal document detailing in writing a sale ...
  3. Billing Cycle

    A billing cycle is the interval of time from the end of one billing, ...
  4. Tax Anticipation Bill - TAB

    A tax anticipation bill was a type of short-term Treasury debt ...
  5. Billing Statement

    A billing statement is a monthly report that credit card companies ...
  6. Bill of Exchange

    A bill of exchange is a written order used primarily in international ...
Related Articles
  1. IPF - Banking

    Procrastinator’s Guide to Bill Payment

    Learn how to avoid punishing late fees and keep your credit score intact with these 10 tips on paying your bills in a timely fashion.
  2. Investing

    Bill of Exchange

    A bill of exchange is a document used in international trade to pay for goods or services. It is signed by the person promising to pay, and given to the person entitled to receive the money. ...
  3. Personal Finance

    8 Steps To An Organized Financial Life

    Disorganization makes planning difficult, and that can cost you big-time. Follow these 8 steps to an organized financial life.
  4. Investing

    Declarations, Ex-Dividends and Record Dates

    Understanding the dates of the dividend payout process can be tricky. We clear up the confusion.
  5. Personal Finance

    What to Do When You Can't Pay Your Medical Debts

    There’s no shame in having medical debt that you can't pay. Here's how to get help.
  6. Personal Finance

    Fed Will Print More $50 Bills This Year

    It costs three times more to produce a $50 bill than a $1 bill. Here's why:
  7. Trading

    The Life Of A $20 Bill

    Next time you pull a $20 out of your wallet, consider where it has been.
  8. Investing

    How to use the dividend capture strategy

    Learn how to implement the dividend capture strategy, an aggressive, income-focused stock trading strategy investors can use to increase equity profits.
  9. Insurance

    Do This If Health Insurance Doesn’t Cover Your Bills

    Health insurance doesn't pay enough to help the millions of consumers who are drowning in medical debt. Are there any other options to soften the blow?
  10. Personal Finance

    Mortgage Borrowers Face Some Changes With Senate Bill

    If the financial reform bill is approved, changes are coming for mortgage borrowers.
RELATED FAQS
  1. What do T+1, T+2 and T+3 mean?

    For security transactions, T+1, T+2, and T+3 refer to settlement dates which occur on a transaction date plus one, two and ... Read Answer >>
Trading Center