Uniform Practice Timelines and Procedures

Question 1

If a trade discrepancy occurs, when is a corrected confirm sent?

Answer 1

By the party in error within 1 business day

-If the issue is not resolved, both parties submit a DK notice

Question 2

Process if only one party sends a confirm

Answer 2

1) the confirming party must phone other party no earlier than 4 business days after the trade date and no later than 8 business days after trade date
2) After phone, written “failure to confirm” notice is sent within 1 business day

Question 3

If you receive a “failure to confirm” what do you do and when?

Answer 3

You must promptly investigate trade and send written confirm or nonrecognition within 1 business day

Question 4

What is good delivery on bearer bonds?

Answer 4

Denomination of 1000 or 5000

Question 5

What is good delivery for registered bonds?

Answer 5

1000 (or multiples of) up to 100K

Question 6

What makes mutilated certificated good delivery?

Answer 6

Letter from:

• Transfer agent
• Issuer
• Paying agent
• Trustee or registrar

Question 7

What makes mutilated coupons good delivery?

Answer 7

Validation from issuer or commercial bank

Question 8

When do small money differences need to be settled?

Answer 8

Within 10 business days of settlement (seller’s price wins)

Question 9

Who validates endorsed bond signatures (or alterations)?

Answer 9

A commercial bank or NYSE member

Question 10

When does accrued interest start/end?

Answer 10

From (and including) last pay date up to (but not including settlement)

WATCH OUT FOR WEEKENDS!!!

Question 11

What is trading flat?

Answer 11

Bonds that do not have accrued interest (zeros and defaulted bonds)

Question 12

Interest Claim Timeline

Answer 12

1) The person who is owed interest sends written notice
2) A check must be sent for money owed within 10 business days of receiving notice
3) If claim is made 60+ days after last interest payment, check must be sent within 20 business days

NOTE: If the receiving BD denies the claim, it must send a written notice to that effect within 10 business days after receiving the claim

Question 13

1 business day reclamations

Answer 13

• Missing coupons
• Mutilated certs
• Missing legal opinion
• Missing proof of insurance

Question 14

3 business day reclamations

Answer 14

Dishonored interest check

Question 15

18 month reclamations

Answer 15

• Irregular delivery

- Transfer agent wont accept

Question 16

Unlimited Reclamations

Answer 16

• Bonds are lost, stolen, counterfeit

- Securities were subject to call and that was not disclosed at time of trade

Question 17

If a trade has been agreed upon, but not yet closed out, when must it be closed or cancelled?

Answer 17

Within 10 calendar days after settlement

Question 18

Procedure for a purchaser notifying a seller they intend to close out a trade not honored?

Answer 18

1) Notice is sent via interdealer communication of intent to close out. Earliest time for this is 1 business day after original settlement
2) The purchaser’s notice must include a deadline for delivery. This cannot be earlier than 5:15 PM EST of the 3rd business day following the transmission of intent to close out
3) The purchaser can wait longer that 3 business days after notice. However, per the rules, the trade must be closed out by the 10th calendar day of settlement

The seller subject to a close out notice is called the “obliged party”

Question 19

Options if the purchaser choses to close out

Answer 19

1) Buy in the open market and bill the seller for any loss
2) Accept from the seller comparable securities
3) Require the seller to repurchase the securities to account for trade expenses, accrued interest, and market fluctuations

Question 20

Retransmittal

Answer 20

Usually a clearing firm that receives a pending close out notice from an introducing BD

• Must transmit the notice to the designated BD by 5:15 PM EST 1 business day after receipt.
• If a notice is retransmitted, the terms of the delivery are extended by 1 business day
• The retransmitting party must let the originating party know the close out notice has been retransmitted

Question 21

Closeout by Seller Procedure

Answer 21

1) Seller can sellout position in buyers account at market no earlier than the close of business the day after intent to close was delivered
2) If this happens, seller must phone buyer promptly and then immediately send a confirm of the transaction
3) Any money/costs incurred by the close out must be forwarded to the purchaser within 5 business days of closeout