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Question

Difficulty: MediumSettlement Dates, Trade Confirmations, and Corporate Actions

Match each securities settlement term or trade confirmation disclosure requirement on the left with its correct regulatory definition or operational timeframe on the right.

  • Agency Transaction ConfirmationDiscloses the broker-dealer's commission and execution time upon customer request under SEC Rule 10b-10.
  • Principal Transaction ConfirmationDiscloses the dealer's markup or markdown relative to the prevailing market price.
  • Regular-Way Equity SettlementRequires completion of delivery and payment on the first business day following the trade date (T+1T+1).
  • Cash SettlementRequires completion of delivery and payment on the exact same business day as the trade date.

Answer

Agency Transaction Confirmation matches disclosure of commission and execution time; Principal Transaction Confirmation matches disclosure of markup or markdown; Regular-Way Equity Settlement matches T+1T+1 settlement; Cash Settlement matches same-day delivery and payment.
Each matched pairing correctly reflects FINRA and SEC rules: agency capacity necessitates disclosing commissions, principal capacity necessitates disclosing markups or markdowns, regular-way equity settlement requires payment and delivery on T+1T+1, and cash settlement requires same-day execution.

Step-by-Step Solution

1
Identify broker-dealer capacity disclosure rules under SEC Rule 10b-10.
Agency trades require disclosing commission amounts and offering trade execution time, whereas principal trades require disclosing markups or markdowns relative to the prevailing market price.
Broker-dealers must clearly state their operational role and compensation method on trade confirmations.
2
Determine settlement rules for regular-way versus cash settlement trades.
Standard regular-way equity transactions settle on T+1T+1, while cash settlement trades demand same-day completion.
Standard industry rules mandate T+1T+1 for regular-way corporate securities, whereas cash settlement requires trade-date fulfillment.

Key Concept

Broker-dealer capacity disclosures on trade confirmations and standardized settlement cycles (T+1T+1 vs. cash settlement).
Estimated Time:1m 30s
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Topics

Settlement Dates, Trade Confirmations, and Corporate Actions