Series 99 Trade Settlement & Clearance Procedures 2

Question 1

What does the term 'fail to deliver' mean in the context of securities settlement?

Accepted Answer

The seller fails to deliver securities on settlement date

Answer

A fail to deliver occurs when the selling party does not deliver the securities to the buyer by the settlement date.

Question 2

Which entity acts as the central counterparty (CCP) for most U.S. equity trades?

Accepted Answer

DTCC's National Securities Clearing Corporation (NSCC)

Answer

The NSCC, a subsidiary of DTCC, serves as the central counterparty for the vast majority of U.S. equity transactions, guaranteeing settlement.

Question 3

What is 'netting' in the clearance process?

Accepted Answer

Combining multiple buy and sell obligations to calculate a single net position

Answer

Netting aggregates all buy and sell obligations for a participant, reducing the number and value of securities and funds that must actually be exchanged.

Question 4

Under Regulation T, how many business days does a customer generally have to pay for a securities purchase in a cash account?

Accepted Answer

2 business days

Answer

Regulation T requires customers in a cash account to pay for securities purchases within 2 business days of the settlement date (effectively by T+2).

Question 5

What is the primary function of DTC (Depository Trust Company)?

Accepted Answer

Providing custody and book-entry settlement for securities

Answer

DTC holds securities in immobilized or dematerialized form and facilitates book-entry transfers between participants, eliminating the need to move physical certificates.

(Series 99) Operations Professional Exam Practice Test

(Series 99) Operations Professional Exam Practice Test

Series 99 Trade Settlement & Clearance Procedures 2