A regular-way secondary market trade in corporate equities is executed between two FINRA member broker-dealers. Arrange the following operational steps in the correct chronological sequence from trade execution through final settlement.
- 1The purchasing and selling broker-dealers report trade details to the National Securities Clearing Corporation (NSCC) for trade comparison and validation.
- 2NSCC becomes the central counterparty (CCP) through novation, interposing itself between the buyer and seller to guarantee trade completion.
- 3NSCC calculates net settlement obligations for each member firm across all trades using the Continuous Net Settlement (CNS) system.
- 4The Depository Trust Company (DTC) completes final settlement on T+1 by transferring security ownership electronically between participant accounts by book-entry.
Cevap
The correct chronological sequence begins with trade detail reporting to NSCC, followed by NSCC novation as central counterparty, net position determination through Continuous Net Settlement (CNS), and concludes with electronic book-entry security delivery by DTC on settlement date (T+1).
The trade-to-settlement lifecycle follows a strict operational sequence: First, trade details are reported to NSCC for trade comparison. Second, NSCC acts as central counterparty through novation to guarantee the trade. Third, NSCC runs Continuous Net Settlement (CNS) to consolidate obligations into net positions. Finally, DTC performs final settlement on settlement date (T+1) by making electronic book-entry entries in member accounts.
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Anahtar Kavram
Post-Trade Clearance, Netting, and Depository Settlement Sequence