PART A.1 – FIXED INCOME TRANSACTIONS

4803. Fixed income accrued interest

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    1. All securities having interest payable as a fixed obligation, except securities in sale and repurchase agreement transactions, must be conducted on an accrued interest basis until maturity or a default in such payment either occurs or is announced by the debtor, whichever is the earlier event. IIROC may set aside this requirement in specific cases where common practice and expediency prompt such action and will give due notice to all Dealer Members in such cases.

    2. Prior to actual default or announcement by the debtor as specified in subsection 4803(1), sales made of securities but undelivered at the time of default or such announcement, must be conducted on an accrued interest basis under the terms of the original transaction.

    3. Subsequent to default or announcement by the debtor as specified in subsection 4803(1), the securities must be handled on a flat basis with all matured and unpaid coupons attached, until such time as all arrears of interest have been paid and one current coupon has been paid when due.

    4. Transactions in bonds having coupons payable out of income, if and when earned, must take place on a flat basis. Any matured and unpaid income coupons must be attached. Income bonds that have been called for redemption must continue to be traded on a flat basis even after the call date has been published.

    5. Transactions in bonds where an issuer has been subject to reorganization or capital adjustment that results in the bondholders receiving as a bonus or otherwise, certain stock or scrip, such transactions must be ex stock or scrip, unless otherwise stated at the time the trade is made. Such bonds must be traded on a flat basis until such time as all arrears have been paid and one current coupon has been paid when due, except where IIROC has determined otherwise.

    6. Accrued interest on trades in interest paying instruments that pay interest monthly and compound interest monthly must be zero, if the value date of the trade is an interest payment date. Otherwise, the accrued interest on such trades must be calculated by multiplying the face amount of the instrument by the interest rate of the instrument and the number of days between the value date of the trade and the last interest payment date prior to the value date of the trade and dividing the result by twelve multiplied by the number of days between the next interest payment date after the value date of the trade and the last interest payment date prior to the value date of the trade.

    7. For bonds or debentures that are only available in registered form, transactions made one business day before a regular interest payment and up to two business days before the closing of the transfer agent’s books for the next interest payment, both days inclusive, will be on an "and interest" basis. The full amount of such interest payment must be deducted by the seller after the calculation of interest on the regular delivery basis, unless delivery is completed to the buyer by 12 p.m. at a transfer point on the date of the closing of the transfer agent’s books for a regular interest payment.

    8. For bonds or debentures that are only available in registered form, transactions from one business day before the closing of the transfer agent’s books up to and including two business days before a regular interest payment must be "less interest" from settlement date to the regular interest payment date.

    9. Where interest on a transaction involves an amount greater than that represented by the half-yearly coupon, interest is to be calculated on the basis of the full amount of the coupon less one or two days, as the case may be.

    There is no history log for this rule.

    There is no history log for this rule.