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11.4 Trade Settlement and Reporting

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Series 7 General Securities Representative

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1 Introduction

About the Series 7 How to Use This Guide

2 Chapter 1: Equity Securities

1.1 Common Stock Basics 1.2 Dividends and Stock Splits 1.3 Preferred Stock 1.4 Rights and Warrants 1.5 ADRs and Foreign Securities

3 Chapter 2: Debt Securities

2.1 Bond Fundamentals 2.2 Bond Yields and Pricing 2.3 Corporate Bonds 2.4 Bond Features and Risks

4 Chapter 3: U.S. Government & Agency Securities

3.1 Treasury Securities 3.2 Agency Securities 3.3 Mortgage-Backed Securities 3.4 Money Market Instruments

5 Chapter 4: Municipal Securities

4.1 Municipal Bond Basics 4.2 General Obligation Bonds 4.3 Revenue Bonds 4.4 Municipal Bond Analysis 4.5 Municipal Securities Rules

6 Chapter 5: Investment Companies

5.1 Investment Company Basics 5.2 Mutual Funds (Open-End Funds) 5.3 Mutual Fund Pricing and Fees 5.4 Closed-End Funds and ETFs 5.5 Investment Company Taxation

7 Chapter 6: Variable Products & Annuities

6.1 Annuity Basics 6.2 Variable Annuities 6.3 Annuity Taxation 6.4 Variable Life Insurance

8 Chapter 7: Alternative Investments & DPPs

7.1 Direct Participation Program Basics 7.2 Types of DPPs 7.3 DPP Suitability and Risks 7.4 Real Estate Investment Trusts (REITs) 7.5 Hedge Funds and Other Alternatives

9 Chapter 8: Options

8.1 Options Basics 8.2 Long and Short Option Positions 8.3 Hedging Strategies 8.4 Spreads and Combinations 8.5 Index and Non-Equity Options 8.6 Options Account Requirements

10 Chapter 9: Customer Accounts

9.1 Account Types 9.2 Cash Accounts 9.3 Margin Accounts 9.4 Margin Calculations 9.5 Fiduciary and Institutional Accounts

11 Chapter 10: Retirement & Education Plans

10.1 ERISA and Qualified Plans 10.2 Defined Benefit vs. Defined Contribution 10.3 Individual Retirement Accounts 10.4 Education Savings Plans 10.5 Plan Distributions and Taxation

12 Chapter 11: Securities Markets & Trading

11.1 The Primary Market 11.2 The Secondary Market 11.3 Order Types and Execution 11.4 Trade Settlement and Reporting 11.5 Market Participants

13 Chapter 12: Rules, Regulations & Ethics

12.1 Regulatory Framework 12.2 Suitability Requirements 12.3 Communications with the Public 12.4 Prohibited Activities 12.5 Customer Protection Rules 12.6 Ethics and Professional Conduct

11.4 Trade Settlement and Reporting

Key Takeaways Explain This Topic AI

Regular-way settlement is T+1 for nearly all securities since the May 28, 2024 SEC shortening from T+2.

With T+1, the ex-dividend date is the record date itself (FINRA Rule 11140), so buyers must purchase at least one business day before the record date.

Confirmations must disclose trade and settlement dates, price, capacity, and commission or markup.

TRACE reports corporate and agency bonds within 15 minutes; EMMA disseminates municipal data via the MSRB.

NSCC clears and nets equity trades as central counterparty while DTC holds securities in book-entry form.

Last updated: October 2026

Settlement Cycles

Settlement is the exchange of securities for cash. Regular-way settlement is the default. Since the SEC shortened the cycle on May 28, 2024 , regular way is T+1 (trade date plus one business day) for essentially all securities the Series 7 covers.

  • Security Regular-way settlement
  • Corporate stocks T+1
  • Corporate bonds T+1
  • Municipal bonds T+1
  • U.S. government securities T+1
  • Listed options T+1
  • Mutual funds T+1

Note the exam contrast: U.S. Treasuries traded directly and many cash transactions can be same-day , but standard secondary trades settle T+1 .

Alternative Settlement

  • Type When it settles
  • Cash Same day (trade date)
  • Regular way T+1
  • Seller's option A date chosen by the seller, minimum T+2, up to 60 days
  • When issued (WI) When the security is actually issued

Cash settlement demands same-day delivery and payment; it is common for dividend plays around the ex-date. A seller's option must be longer than regular way and the seller must give the buyer one business day's written notice before early delivery.

Ex-Dividend and Record Dates

The dividend timeline runs: declaration date → ex-dividend date → record date → payment date. Under T+1 , the ex-dividend date is the record date itself when the record date is a business day (FINRA Rule 11140, amended for T+1 effective May 28, 2024; under the old T+2 cycle it was one business day before).

Worked example: Record date is Thursday, so ex-date is also Thursday .

Buy Wednesday (before ex-date) → settle Thursday → owner of record → receives the dividend.

Buy Thursday (on ex-date) → settle Friday → not on record → no dividend.

A buyer who wants the dividend must purchase before the ex-date.

Trade Confirmations

A broker-dealer must send a written confirmation at or before completion of the transaction (settlement). Required content:

  • Item Detail
  • Trade and settlement dates Execution and due dates
  • Security description Name, CUSIP, quantity
  • Price Per unit and total
  • Capacity Agent or principal
  • Commission If acting as agent
  • Markup/markdown If acting as principal (disclosure rules apply)
  • Trade Reporting Systems

TRACE (Trade Reporting and Compliance Engine) is FINRA's system for corporate and agency debt . Members must report a TRACE-eligible trade as soon as practicable, no later than 15 minutes after execution. (FINRA proposed a one-minute rule but, after industry concern, the SEC's September 2025 action kept the 15-minute deadline .)

EMMA (Electronic Municipal Market Access) is the MSRB's free portal for municipal trade data, official statements, and continuing disclosures.

  • System Operator Covers
  • TRACE FINRA Corporate/agency bonds
  • EMMA MSRB Municipal securities
  • Consolidated Tape SIP Listed equities (Tape A/B/C)

The Consolidated Tape reports last-sale equity data: Tape A = NYSE-listed, Tape B = NYSE American/regional, Tape C = NASDAQ-listed.

Clearing Infrastructure

Under the Depository Trust & Clearing Corporation (DTCC) umbrella:

NSCC (National Securities Clearing Corporation) clears equities and corporate bonds, acts as central counterparty , and uses continuous net settlement (netting) to slash the number of deliveries.

DTC (Depository Trust Company) is the securities depository , holding shares in book-entry (electronic) form and moving them between members.

FICC clears government and mortgage-backed securities.

Settlement flow: (1) trade execution, (2) comparison/matching, (3) NSCC netting of obligations, (4) DTC moves securities while cash moves by wire.

Failed Trades

A fail occurs when a party misses delivery or payment by settlement. If the seller fails to deliver , the buyer may issue a buy-in : after required notice, the buyer purchases the securities elsewhere and bills the failing seller for any price difference. If the buyer fails to pay , the seller may execute a sell-out .

Good Delivery and Accrued Interest

For settlement to occur, securities must be in good delivery form. Stock generally must be delivered in round lots of 100 or in units that add to 100, properly endorsed. Bonds trade with accrued interest added to the price on most issues: corporate and municipal bonds accrue on a 30/360 basis (30-day months, 360-day year), while U.S. Treasuries use actual/actual . Accrued interest is calculated up to but not including the settlement date and is paid by the buyer to the seller, who has held the bond and earned that interest since the last coupon.

CNS and Why T+1 Matters

NSCC processes most equity activity through Continuous Net Settlement (CNS) , a rolling system that nets each member's buys and sells per security into a single daily long or short position against NSCC. Shortening the cycle to T+1 reduces counterparty and market risk and the collateral members must post, because positions are open for fewer days—an exam-tested rationale for the 2024 change.

Common Exam Traps

Regular way is T+1 for stocks, corporate/muni/government bonds, options, and funds since May 28, 2024 ; cash settles same day .

Under T+1, the ex-date is the record date ; buy before the ex-date (at least one business day before the record date) to receive the dividend.

TRACE = corporate/agency bonds, 15 minutes ; EMMA = municipals (MSRB) ; Consolidated Tape = listed equities .

DTC holds securities (book-entry); NSCC clears and nets as central counterparty—do not swap these roles.

A buy-in is the buyer's remedy when the seller fails to deliver ; a sell-out is the seller's remedy when the buyer fails to pay .