Trading when issued

When-issued transactions refer to trading of new shares before their issuance through a paid-in capital increase by allotment to shareholders. They are carried out from the ex-rights date until two business days before the registration date of the new shares at JASDEC. Regardless of the day a when-issued transaction is executed, settlement for all when-issued transactions is carried out on the third day counting from the last day of the trading period for when-issued transactions.

Information on issues for which when-issued transactions will be or are being conducted in connection with a capital increase by allotment to shareholders is available below. When-issued orders are made conditionally because they may not be completed, particularly in the event the offering is canceled. Orders, when issued, are sometimes called orders "with ice" or orders "when distributed. Securities trade on a when-issued basis when they have been announced but not yet issued.

The transaction is settled only after the security has been issued. A when-issued market exists where when-issued instruments are traded. When-issued markets can provide an indication regarding the level of interest that a new issue may attract from investors. When-issued transactions are dependent upon the actual security being issued and the exchange or National Association of Securities Dealers ruling that the transaction is settled.

An industrial conglomerate wants to spin off its chemicals division due to its drag on earnings and low margins. In order to effectuate the spinoff , the conglomerate plans to pay its shareholders a dividend in the form of stock of the new chemicals divisions company. After the record date—the date on which holders of the conglomerate's stock are entitled to receive stock in the spinoff—the conglomerate's shareholders can effectively begin trading the right to receive shares in the spinoff on a when-issued basis.

Those shareholders who buy the rights but do not hold shares of the conglomerate on the distribution date, the date in which the actual shares in the spinoff are issued and begin trading, receive their shares in the spinoff, and the when-issued market ceases.

When issued sheds light on the demand for securities and can, therefore, attract investors who would otherwise sit out the bidding process for the securities for fear of a volatile market. Thus, when issued can decrease volatility when the securities are actually issued because investors have confidence in the level of demand for the securities in question.

When issued helps develop the market for a new security by attracting investors, and it also offers investors liquidity prior to the actual distribution of the securities in question, allowing them to monetize financial assets more readily.

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Non-PD entities can sell the WI security only if they have a preceding purchase contract for equivalent or higher amount. Open Positions in the WI market are subjected to the following limits: i. Non-PD entities — Long Position, not exceeding 5 per cent of the notified amount. PDs — Long or Short Position, not exceeding 10 per cent of the notified amount. In case a PD is unable to deliver securities to the buyer after the auction on the settlement or issue date, the transaction will be settled as per the default settlement mechanism of CCIL.

In the event of cancellation of the auction for whatever reason, all WI trades will be deemed null and void ab initio on grounds of force majeure. The policy should lay down the internal guidelines which should include, inter alia, risk limits on WI position including overall position in the security, WI plus the existing security , an aggregate nominal limit in terms of Face Value for WI and overall security, the internal control arrangements to ensure adherence to regulatory and internal guidelines, reporting of WI activity to the top management, procedure to deal with violations, etc.

A system should be in place to detect violations immediately, certainly within the trading day. The concurrent auditors should specifically verify compliance with these instructions and report violations on the date of trade itself, within a reasonably short time, to the appropriate internal authority. As part of their monthly reporting, concurrent auditors may verify whether the independent back office has taken cognizance of all such lapses and reported the same within the required time frame.

Provided further that no ready forward contracts may be entered into between two persons or entities both maintaining Gilt accounts with same person or entity maintaining Constituent Subsidiary General Ledger account with the Public Debt Office of the Reserve Bank of India. Provided further that no ready forward contracts may be entered into between a person or entity maintaining Subsidiary General Ledger account with Public Debt Office of the Reserve Bank of India with another person or entity maintaining a Gilt account with itself.