Series 24: When-Issued Contracts

When-Issued Contracts

A when-issued contract is a contract between a buyer and seller to transact in a security that has not yet been or may never be issued. U.S. Treasury securities, stock splits, and new issues are often traded on a when-issued basis. “When-issued” is shorthand for the more formal term “when, as and if” transactions.

A when-issued contract must include the following:

• • A description of the security and the plan, if any, in which the security is to be issued or distributed
• • Designation of FINRA as the authority to rule upon the contract
• • Provisions for marking the contract to the market

FINRA’s UPC Committee has the authority to fix a settlement date and decide whether a contract should be honored or cancelled. The settlement date (the date on which the buyer must pay for and the seller must deliver the security) will be determined by the UPC when a sufficient percentage of the issue is outstanding. The contract will be cancelled if any of the following occur:

• • The UPC Committee deems it necessary to resolve any conflict regarding the contract
• • The securities are not to be issued or distributed
• • The terms of the securities’ issuance or distribution have materially changed from those contemplated in the