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Series 7 practice questionmediumWhen-Issued Trading

A corporation announces a 2-for-1 stock split effective April 15. Between the announcement date and the effective date, the new shares trade on a 'when-issued' basis. Which statement is TRUE about when-issued trading?

  1. AWhen-issued trades require full payment at the time of the order
  2. BWhen-issued trading is only permitted for government securities
  3. CWhen-issued trades cannot be cancelled under any circumstances
  4. DThere is no settlement date set at the time of the trade; settlement occurs when the securities are actually issued✓ Correct answer
Explanation

Why D — There is no settlement date set at the time of the trade; settlement occurs when the securities are actually issued

When-issued (WI) trading occurs when securities have been authorized but not yet physically issued or delivered. In WI trading, there is no set settlement date at the time of the trade because settlement depends on when the securities are actually issued. WI trading is common for new issues of stocks, bonds, stock splits, and Treasury securities. If the issuance is cancelled, all when-issued trades are also cancelled.

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