Clearing: Trade Comparison and Confirmations
For trades that are not settled and cleared electronically, each party to a transaction must exchange a confirmation of the trade on or before the first business day following the transaction. Trade confirmations are done on a Uniform Comparison Form, which identifies the security, the parties, the price and any other trade details, including the trade date and the settlement date. Both confirmations must be compared to each other to ensure there are no discrepancies. For cash settlements that are not settled or cleared electronically, the confirmations must be exchanged on the same day as the transaction.
Here is what the Uniform Comparison Form looks like:
If a party receives a confirmation for a transaction it does not recognize or accept, it must return a “don’t-know notice” (DK notice). A DK notice indicates that the party does not recognize the trade. Any discrepancies between the two trade confirmations should be promptly resolved.
If one party does not receive either a confirmation form or DK notice by one business day after the transaction, it must send the other party a DK notice by certified mail or messenger. The counter-party will have two business days to respond via certified mail or messenger. If the confirming party still has heard nothing from the other party within two business days of receipt, it will no longer be held accountable to follow through with the transaction. It can either drop the trade or pursue remedies under the Code of Arbitration.
Example Question: MegaBrokerage Services has sent a trade confirmation to AllBrokerage Services for regular-way settlement trade, but received no reply after one business day. They send a DK notice by messenger to AllBrokerage Services and it is received the same day. If they hear nothing else from AllBrokerage, when are they free to drop the trade with no obligation to AllBrokerage Services?
1. A. After four ad