BD Confirmations

Overview

At its most basic level, the obligation that broker-dealers have to send a transaction confirmation is intended to ensure that the parties have in fact agreed on the basic terms of the trade; i.e., the security, the amount, the price, and whether the trade is a buy or a sell. The confirmation is also intended to provide the customer with information that will allow the customer to assess the fairness of the transaction terms and whether the broker-dealer was subject to a conflict of interest; e.g., whether the broker-dealer was acting as agent or as principal, the broker-dealer when acting as agent must disclose the commission and on riskless principal and certain other principal trades, the markup amount; whether the broker-dealer may receive payment for order flow. In the case of debt securities, the broker-dealer must not only disclose the effective yield on the security, but must take into account factors that may affect the yield of the security, such as an early call.

Some securities, such as options, are subject to particular confirmation requirements. See also the Focus Page on Confirmations for Municipal Securities, which are subject to detailed disclosure requirements that are tailored to certain debt features that are particularly relevant to, or more common in, the munis market.

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