New Issue Securities

New issue securities are sold directly from the issuer to the investor in the primary market. They are available in maturities ranging from 9 months to 30 years with either callable or non-callable structures.In order to support the convenience of being held in a brokerage account, new issues are settled exclusively through the Depository Trust Corporation (DTC) in Book Entry form. As a result, physical certificates of ownership are not available.

Settlement Rules of New Issues

New corporate issues have an extended settlement date. The sale offer is held open for a week or more, and the settlement of the sale will occur three days after the 'close' of the offering. For example, if a new issue security is offered for the week of Jan 13 through Jan 21, the settlement date will be Jan 24 (Closing Date + 3 Days). This time frame means that the actual trade date of new issue securities could occur 10 days or more before the settlement is applied to an investor's account. The interest on new issues is paid on a 360-day year and a 30-day month, and is calculated from the settlement date.

Initial Public Offerings vs. Secondary Offerings

The process of selling new issues to investors is known as underwriting. New issue securities appear as either initial public offerings (IPO) or secondary offerings in the primary market. When a company issues a new security to investors for the first time, the security may be referred to as an initial public offering (or an IPO, for short). Companies can also issue shares that have been previously registered in a shelf registration and held for a period of time before being offered to investors. Shares that are the result of a shelf registration are referred to as a secondary offering during the trade process.

Bonds involve risks including, but not limited to interest rate risk, reinvestment risk, inflation risk, call risk, liquidity risk, credit risk, market risk, default risk, event risk and a risk of loss of principal. New issue offerings are sold by prospectus or offering circular available at Investors should read these carefully.