312 THE WORK OF THE STOCK EXCHANGE
system.? In the vast majority of cases, and always unless
otherwise stated at the time of negotiation, sales of shares
made on the New York Stock Exchange are made “regular
way’ for delivery by 2:15 p.M. upon the next full business day
after the date of contract. Transactions occurring on Fridays
and on Saturdays (on the latter day the Exchange closes at 12
M.) are cleared on Saturday, but settled the following Monday.
Under the limitations prescribed in its Constitution,® how-
ever, the time which may elapse between the negotiation and
the settlement of a Stock Exchange contract, may be deter-
mined by special agreement when the contract is made. With
a ‘“‘cash” transaction, stock must be delivered and money paid
on the very day of negotiation. Contracts may also be fixed
“at three days,” for settlement on the third day after negotia-
tion. Many bonds, as has been pointed out,* are sold for a
“deferred delivery” of seven days. Furthermore, delivery may
be arranged according to “buyer’s’” or “seller’s” option for not
less than four or more than sixty days. Under a seller’s
option, the seller can deliver the stock and demand payment for
it on any day within the period of the option, provided he
notifies the buyer by 2:15 the previous day, while the buyer
during the life of a buyer’s option can similarly pay his money
at any time and call for his stock. With bonds,® deliveries are
frequently deferred until the seventh day following the date of
contract. All these different deliveries except those for “cash”
are susceptible of being handled through the Stock Clearing
Corporation.
Stages of the Security Clearing and Settling Process.—
After a security contract is negotiated on the Stock Exchange,
there are five basic processes through which it must pass before
it is finally settled. First, both buyer and seller must signify
to the Stock Clearing Corporation and to each other their
agreement as to its essential terms—this process is known as
2 See Chapter XI, p. 276.
See Constitution (Rules, Chapter I).
See Chapter X, p. 270.
See Chapter X. pn. 270.
