Trade Confirmations and Completing a Transaction
SEC Rule 10b-10 dictates that a trade confirmation must be given to a customer at or before the completion of a transaction. The SEC defines the conditions under which a transaction is considered complete.
A purchase is judged to be complete when payment is received for the securities on the settlement date, which must occur no later than two business days after the trade date (T + 2). Likewise, a sale is judged to be complete when the securities are delivered on the settlement date. A sale would also be considered complete if the securities have been delivered and payment has been received before the settlement date.
You can remember these dates with the acronym PPSS: completion of a Purchase is when Payment is complete; completion of a Sale is when Securities are delivered.
Sample Question
According to the SEC, which of the following would not be enough to constitute a completed purchase?
A. Fifty percent of payment was made on the settlement date for a security bought on margin.
B. Securities were delivered to the purchaser and 100% of payment was paid before the settlement date.
C. The securities were delivered on the settlement date.
D. One hundred percent of payment was made on the settlement date for a security.
Answer: C. A purchase is said to be complete when payment is made for securities on the settlement date. Delivery of the securities on the settlement date would constitute a sale, but not a completed purchase.
The following information must be disclosed on the trade confirmation that is required for most securities transactions:
• date and time of the transaction
• name of the security
• price of the security
• number of shares purchased or sold
• if the broker-dealer was acting in an agency capacity for another person, then the name of the person and the compensation the broker-dealer will receive from the other party to the