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In 1988, there was no Federal rule that mandated a specific
settlement cycle for securities transactions.1 Instead, the
settlement cycle in the United States varied among markets and
was largely a function of market custom, exchange rules, and
industry practice. The rules of the New York Stock Exchange,
however, required transactions to be settled no later than the
fifth business day after the trade date.
After a customer’s order is received, petitioner transmits
the order to the exchange floor for execution via the exchange’s
system or through floor brokers. A report of execution, which
lists the transactions in terms of shares purchased or sold, but
not by customer name or account number, is returned to the firm
as a trade record. After the trade is executed and while the
customer is still on the telephone, petitioner can verbally
confirm the execution for "market" orders2 placed via telephone
while the markets are open. The price paid or received by the
customer for the purchase or sale of securities is determined
according to the market price in effect on the trade date.
Petitioner must perform a series of functions after the
order is placed and the trade executed. These functions, which
1See infra note 4.
2A "market" order is an order from a customer to buy or sell
securities as soon as practicable at the then-current market
price. This is in contrast to a "limit" order, which is an order
to buy or sell securities when the market reaches a price level
specified by the customer.
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Last modified: May 25, 2011