Order Processing and Settlement – Series 7 Exam

Order Processing and Settlement – Series 7 Exam
Published on finra-exam-mastery.com

📋 Understanding Order Processing and Settlement on the Series 7 Exam
Order processing and settlement are essential components of broker-dealer operations. The Series 7 exam tests your ability to understand the correct handling of customer orders, regulatory timeframes, trade reporting rules, and how trades move from execution to final settlement.

📚 Key Topics in Order Processing and Settlement

✅ Order Ticket Information
Each order must include:

• Customer account number
• Time and date of order entry
• Whether the order is buy, sell long, or sell short
• Terms and conditions (e.g., limit, market, stop order)
• Time-in-force instructions (e.g., day order, good-’til-canceled)

✅ Trade Execution

• Market Order: Executed immediately at the best available price
• Limit Order: Executed only at a specified price or better
• Stop Order: Becomes a market order once a trigger price is reached
• Stop-Limit Order: Becomes a limit order once the stop price is triggered

✅ Settlement Timing

• Regular Way Settlement:
  • Stocks, corporate bonds, municipal bonds: T+2 (trade date plus two business days)
  • Treasury securities and money market instruments: T+1
• Cash Settlement:
  • Same day (by 2:30 PM ET if trade executed before noon; otherwise ASAP)
• Seller’s Option Settlement:
  • Seller specifies settlement date, usually no earlier than T+3

✅ Settlement Entities

• Clearing Corporation: Ensures trades are compared, cleared, and settled (e.g., NSCC for equities)
• Depository: Safekeeps securities and facilitates transfer (e.g., DTC)

✅ Regulatory Trade Reporting

• FINRA requires trades to be reported within 10 seconds of execution (for OTC trades)
• Reports must reflect actual trade conditions: price, volume, and time of execution

✅ Payment Dates – Regulation T

• Payment for securities purchased in a cash account must be made by T+4
• If payment is not made, the account may be frozen for 90 days

📘 Common Series 7 Exam Scenarios

• Customer places a limit order—how long is it valid if not specified? (Answer: Until end of day unless marked GTC)
• Trade is executed in an equity security—when does settlement occur? (Answer: T+2)
• What happens if payment is not received under Regulation T? (Answer: Sale out and freeze of account)

🧠 Exam Tip
Always match the correct settlement timing to the security type. T+1 for Treasuries and options, T+2 for most others. Pay close attention to keywords like “regular way,” “cash settlement,” and “seller’s option.”

🎯 Master Order Processing and Settlement for the Series 7
Being fast and accurate with order handling and settlement questions can significantly boost your score. Understanding the operational flow helps with both compliance and supervisory sections.

🔗 Access complete Series 7 study materials, settlement timelines, and trade reporting drills at finra-exam-mastery.com