Series 99 Trade Settlement & Clearance Procedures 3

Question 1

What is a 'buy-in' procedure in securities settlement?

Accepted Answer

A firm purchases securities in the open market to close out a counterparty's fail to deliver

Answer

A buy-in allows the receiving party, after proper notice, to purchase securities in the open market and charge any additional cost to the failing counterparty.

Question 2

What does 'ex-dividend date' mean in the context of corporate actions and settlement?

Accepted Answer

The first date on which a buyer of shares is NOT entitled to the declared dividend

Answer

On and after the ex-dividend date, purchasers of the stock will not receive the upcoming dividend; the seller retains that entitlement.

Question 3

Which of the following is a purpose of the Continuous Net Settlement (CNS) system operated by NSCC?

Accepted Answer

To net multilateral trade obligations daily and carry forward unresolved positions

Answer

CNS multilaterally nets all eligible equity transactions daily and rolls unsettled positions forward, reducing overall settlement fails and obligations.

Question 4

A trade is executed on Monday. Under the standard T+2 settlement cycle for U.S. equities, when does settlement typically occur (assuming no holidays)?

Accepted Answer

Wednesday

Answer

Under T+2, settlement occurs two business days after the trade date, so a Monday trade settles on Wednesday.

Question 5

What is the role of a 'correspondent clearing' arrangement?

Accepted Answer

A large broker-dealer clears trades on behalf of smaller introducing broker-dealers

Answer

In a correspondent clearing arrangement, a carrying/clearing firm handles settlement, custody, and operational functions for an introducing broker-dealer's customer accounts.

(Series 99) Operations Professional Exam Practice Test

(Series 99) Operations Professional Exam Practice Test

Series 99 Trade Settlement & Clearance Procedures 3