Delivery Requirements and the Settlement Cycle
Chapters in this video
- 0:00 Meet the settlement clock and T+1
- 1:16 Covered products and the municipal-securities trap
- 3:42 Exceptions: cash, seller's option, and the firm-commitment ET rule
- 4:46 Why Regulation T means T+3 for customer payment
- 6:10 Mutual-fund redemption ceilings and variable-contract NAV settlement
- 7:41 Rapid-fire exam recap
What this video covers
- Why the standard-settlement-cycle rule imposes T+1 for equities, corporate bonds, municipal bonds, Exchange-Traded Funds (ETFs), and mutual funds via National Securities Clearing Corporation (NSCC) Fund/SERV
- How municipal securities are exempt from the standard-settlement-cycle rule yet still settle T+1 under separate Municipal Securities Rulemaking Board (MSRB) standards, and why "municipal securities settle T+2" is a trap
- When a firm-commitment underwritten registered offering priced after 4:30 p.m. Eastern Time (ET) settles T+2, not T+1
- Why cash settlement means T+0 and seller's option means T+2 through T+60, both specified at the time of trade
- How Regulation T gives customers until T+3 to pay for a purchase (standard settlement of T+1 plus two business days), and why outdated T+2/T+4 distractors are wrong
- Why the Investment Company Act sets a seven-calendar-day ceiling for mutual-fund redemptions, even though operational practice via Fund/SERV is T+1
- How variable-contract settlement means unit transfer into the separate-account sub-account at the next valuation-date Net Asset Value (NAV)
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