FINRA Rule 11150

Paragraph (b), Late Information Re: Ex-Interest Dates, establishes the discretionary fallback — if notice of payment of interest is not made public sufficiently in advance of the record date or payment date to permit the security to be dealt in ex-interest under paragraph (a), the security shall be dealt in ex-interest on the first business day which, in the opinion of the Committee, shall be practical having regard to the circumstances pertaining. 

FINRA Rule 11150 was most recently amended by SR-FINRA-2023-017 effective May 28, 2024 — the same T+1 settlement cycle conformity amendment that amended FINRA Rule 11140, superseding the T+2-era version effective since September 5, 2017 under SR-FINRA-2016-047. Five selected notices are associated — 83-69, 91-63, 10-49, 17-19, and 24-04.

FINRA Rule 11150 sits within the 11100 Scope of Uniform Practice Code subsection of the 11000 Uniform Practice Code, immediately following FINRA Rule 11140's ex-dividend, ex-rights, and ex-warrants framework and immediately preceding FINRA Rule 11160's ex liquidating payments framework.

The Concept of Trading "Flat": Why Bonds Need Their Own Ex-Date Framework

FINRA Rule 11150's title identifies its scope precisely — bonds or similar evidences of indebtedness which are traded flat. A bond traded flat is one whose quoted price includes no separate accounting for accrued interest — the price the buyer pays is the total consideration for the bond, with no additional and accrued interest amount added on top, as would be the case for a bond traded and accrued interest, where accrued interest is calculated separately and added to the quoted price.

Bonds trade flat for several distinct reasons that recur throughout the Uniform Practice Code's bond-related provisions. Income bonds and other contingent-interest securities — discussed in connection with FINRA Rule 11130(b)(2) and FINRA Rule 11620 — trade flat because their interest payments are not fixed obligations but depend on the issuer's earnings or other contingencies, making a separate accrued-interest calculation inappropriate. Bonds in default — where interest payments have ceased — trade flat because there is no current interest accruing to calculate. And certain other categories of debt instruments, by market convention or by the terms of their indentures, simply trade flat regardless of whether interest is currently being paid.

For bonds traded and accrued interest, the accrued-interest mechanism itself handles the economic allocation of interest between buyer and seller around an interest payment date — the buyer pays the seller for interest accrued since the last payment, and then the buyer receives the next full interest payment from the issuer, having effectively been reimbursed in advance for the portion of that payment attributable to the seller's holding period. For bonds traded flat, no such mechanism exists — the quoted price does not separately account for accrued interest, which means the ex-interest date concept that FINRA Rule 11150 establishes becomes the operative mechanism for determining which party — buyer or seller — is entitled to an upcoming interest payment on a flat-traded bond.

FINRA Rule 11150(a): The Three Normal Ex-Interest Date Rules

FINRA Rule 11150(a) establishes three numbered provisions that together cover the complete range of scenarios for determining the normal — meaning standard, sufficient-notice — ex-interest date for a flat-traded bond.

Paragraph (a)(1) — on the record date if the record date falls on a business day — is the current, post-May 28, 2024 rule reflecting the T+1 settlement cycle conformity amendment through SR-FINRA-2023-017. Under this current rule, when the record date for an upcoming interest payment falls on a business day, that record date itself is the ex-interest date — a transaction executed on the record date will, under the T+1 settlement cycle, settle the following business day, meaning the buyer will not yet be the holder of record as of the record date and will not be entitled to the upcoming interest payment, which is precisely the outcome the ex-interest designation is meant to produce.

This represents the same one-day shift that FINRA Rule 11140(b)(1) underwent — confirmed from the Federal Register filing for SR-FINRA-2023-017, the prior T+2-era version of FINRA Rule 11150(a)(1) had provided that flat-traded bonds become ex-interest on the first business day preceding the record date if the record date falls on a business day — one day earlier than the current rule. The shortening of the standard settlement cycle from T+2 to T+1 shifted the ex-interest date later by exactly one day, from the day before the record date to the record date itself, for the identical reason discussed in FINRA Rule 11140's entry — a transaction executed one business day closer to the record date now settles in time to make the buyer ineligible for the distribution at the same point in the calendar as it previously would have under the longer settlement cycle.

Paragraph (a)(2) — on the first business day preceding the record date if the record date falls on a day other than a business day — addresses the scenario where the record date itself is not a business day, such as a weekend or holiday. In this scenario, the ex-interest date shifts to the first business day preceding that non-business-day record date. This provision's continued reference to a day other than a business day — rather than FINRA Rule 11140(b)(1)'s parallel reference to a day designated by the Committee as a non-delivery date — reflects a textual distinction between the two rules' formulations for their respective second branches, though both provisions serve the analogous function of addressing record dates that do not fall on standard business days.

Paragraph (a)(3) — on the first business day preceding the date on which an interest payment is to be made if no record date has been fixed — addresses bonds for which no formal record date mechanism exists at all. Some debt instruments, particularly those without a centralized registrar-based record date determination process, may simply have a scheduled interest payment date without a corresponding record date being formally fixed by a trustee, registrar, or paying agent as FINRA Rule 11120(f) contemplates. For such instruments, paragraph (a)(3) anchors the ex-interest date to the payment date itself — specifically, the first business day preceding that payment date — providing a workable ex-interest determination even in the absence of the record-date mechanism that paragraphs (a)(1) and (a)(2) depend upon.

Notably, paragraph (a)(3) was not amended by the May 28, 2024 T+1 conformity amendment in the same manner as paragraph (a)(1) — it retains its first business day preceding the date on which an interest payment is to be made formulation across both the T+2 and T+1 versions confirmed in Regulatory Notices 17-19 and 24-04. This makes sense given paragraph (a)(3)'s anchor point — the interest payment date itself, rather than a record date that precedes the payment date by a settlement-cycle-dependent interval. Since paragraph (a)(3) already anchors directly to the payment date with a fixed one-business-day offset, there is no settlement-cycle-dependent calculation embedded in its formula that would need adjustment when the settlement cycle itself changes.

FINRA Rule 11150(b): The Late Information Fallback

FINRA Rule 11150(b) provides the discretionary fallback for situations where notice of payment of interest is not made public sufficiently in advance of the record date or the payment date, as the case may be, to permit the security to be dealt in ex-interest in accordance with paragraph (a). In such situations, the security shall be dealt in ex-interest on the first business day which, in the opinion of the Committee, shall be practical having regard to the circumstances pertaining.

This fallback provision mirrors FINRA Rule 11140(c) and (e)'s late-information fallbacks in both structure and function — when an issuer's notice of an upcoming interest payment comes too late for the formulaic rules of paragraph (a) to be meaningfully applied in advance, the UPC Committee steps in with case-by-case discretionary authority to designate whatever ex-interest date is practical given the specific circumstances. The as the case may be language acknowledges that paragraph (a)'s three provisions employ two distinct anchor points — the record date for paragraphs (a)(1) and (a)(2), and the payment date for paragraph (a)(3) — and paragraph (b)'s late-information fallback applies regardless of which anchor point's advance-notice requirement was not satisfied.

The Relationship Between FINRA Rules 11140 and 11150: Parallel Structures for Equity and Debt

FINRA Rule 11150's structure closely parallels FINRA Rule 11140's structure, reflecting their shared underlying purpose — applying the FINRA Rule 11120(d) ex-date concept to the specific mechanics of two different categories of securities. Both rules establish normal date provisions calibrated to the standard settlement cycle, both rules include a late-information discretionary fallback vesting the UPC Committee with case-by-case authority, and both rules were amended in tandem through the same settlement cycle conformity amendments — SR-FINRA-2016-047 effective September 5, 2017 for the T+2 transition, and SR-FINRA-2023-017 effective May 28, 2024 for the T+1 transition, with both amendments confirmed from the identical Regulatory Notices 17-19 and 24-04 respectively.

Despite these structural parallels, the two rules differ in important respects that reflect the different products they address. FINRA Rule 11140 must accommodate multiple distinct categories of corporate action — cash dividends, stock dividends, stock splits, warrant issuances and distributions of varying relative sizes, ADRs and foreign securities, and transferable rights subscription offerings — each potentially requiring its own treatment, which is why FINRA Rule 11140 contains five lettered paragraphs addressing these varied scenarios. FINRA Rule 11150, by contrast, addresses a single category of distribution — interest payments on flat-traded bonds — and therefore requires only two lettered paragraphs: the normal-date provisions of paragraph (a), covering the three scenarios of business-day record date, non-business-day record date, and no record date at all, and the late-information fallback of paragraph (b).

This relative simplicity should not be mistaken for lesser importance — the ex-interest date determination for flat-traded bonds carries the same fundamental economic consequence as the ex-dividend date determination for equity securities: it determines which party to a transaction — the buyer or the seller — is entitled to receive an upcoming distribution, with potentially significant dollar value depending on the size of the interest payment and the volume of transactions occurring around the relevant dates.

The Settlement Cycle Amendment History: A Shared Trajectory with FINRA Rule 11140

FINRA Rule 11150's amendment history tracks FINRA Rule 11140's amendment history closely for the settlement-cycle-related amendments, though FINRA Rule 11150's overall amendment history is somewhat shorter — six amendments compared to FINRA Rule 11140's eight — reflecting FINRA Rule 11150's narrower scope and correspondingly fewer occasions for substantive amendment over the decades.

The original effective dates of February 9, 1968 and March 18, 1983 predate the Consolidated FINRA Rulebook entirely, tracing to the rule's NASD-era origins. SR-NASD-91-13 effective November 1, 1991 and SR-NASD-94-56 effective June 7, 1995 represent NASD-era refinements. SR-FINRA-2010-030 effective December 15, 2010 represents the transfer into the Consolidated FINRA Rulebook alongside the other 11100 subsection rules discussed throughout this dictionary's recent entries. SR-FINRA-2016-047 effective September 5, 2017 implemented the T+2 settlement cycle conformity amendments — confirmed from Regulatory Notice 17-19, which described the resulting paragraph (a)(1) as setting the ex-interest date at the first business day preceding the record date for business-day record dates. And SR-FINRA-2023-017 effective May 28, 2024 implemented the T+1 settlement cycle conformity amendments — confirmed from Regulatory Notice 24-04, which described the resulting paragraph (a)(1) as setting the ex-interest date at the record date itself for business-day record dates, the version currently in effect.

Unlike FINRA Rule 11140, which underwent two separate 2017 amendments — SR-FINRA-2016-047 effective September 5, 2017 and SR-FINRA-2017-026 effective August 17, 2017 — FINRA Rule 11150's amendment history shows only the single SR-FINRA-2016-047 amendment for the 2017 T+2 transition, without a parallel second 2017 amendment. This difference likely reflects the fact that SR-FINRA-2017-026 addressed matters specific to FINRA Rule 11140 — such as the ADR and foreign securities provision of paragraph (b)(3) or other equity-specific provisions — that have no counterpart in FINRA Rule 11150's narrower bond-focused scope.

Connection to FINRA Rules 11110, 11120, 11130, 11140, 11160, and 11620

FINRA Rule 11150 connects to FINRA Rule 11110 as the source of the UPC Committee's discretionary authority exercised under paragraph (b)'s late-information fallback. It connects to FINRA Rule 11120(d) and (f) — whose general ex-date and record date definitions FINRA Rule 11150 operationalizes for the specific context of flat-traded bond interest payments, with paragraph (a)(3)'s no-record-date-fixed scenario addressing instruments that fall outside FINRA Rule 11120(f)'s record date definition entirely. It connects to FINRA Rule 11130(b) — whose accrued interest framework for when, as and if issued/distributed transactions in income or contingent interest securities of new or reorganized companies depends on the same flat-trading and ex-date concepts that FINRA Rule 11150 addresses for ordinary flat-traded bonds. It connects to FINRA Rule 11140 as its structural and functional counterpart for equity securities, sharing the same settlement-cycle-dependent amendment trajectory. It connects to FINRA Rule 11160's ex liquidating payments framework, the immediately following rule addressing a related category of ex-date determination. And it connects to FINRA Rule 11620's computation of interest framework — particularly its due-bill check mechanism for deliveries made after the record date but before the security traded ex-interest, and its treatment of income bonds as traded flat except where a fixed rate is guaranteed in the indenture, both of which directly depend on the ex-interest date that FINRA Rule 11150 establishes.

Examination Relevance and Key Takeaways

FINRA Rule 11150 is tested on the Series 7 and Series 24 examinations as the ex-interest date framework for flat-traded bonds — the bond-market counterpart to FINRA Rule 11140's equity-focused ex-dividend, ex-rights, and ex-warrants framework, sharing the same settlement-cycle-dependent amendment trajectory.

The key points to retain are these: FINRA Rule 11150 applies to all transactions except cash transactions in bonds or similar evidences of indebtedness which are traded flat — meaning the quoted price includes no separate accrued-interest component; FINRA Rule 11150(a) — as amended effective May 28, 2024 to conform to the T+1 settlement cycle under SR-FINRA-2023-017 — establishes three normal ex-interest date rules: the record date itself if it falls on a business day (a one-business-day-later shift from the prior T+2-era rule confirmed in Regulatory Notice 17-19), the first business day preceding the record date if the record date falls on a non-business day, or — if no record date has been fixed — the first business day preceding the interest payment date itself, a provision unchanged by the T+1 amendment since it already anchors directly to the payment date; FINRA Rule 11150(b) provides the discretionary late-information fallback — when notice of an interest payment is not made public sufficiently in advance of the relevant record date or payment date, the Committee designates whatever ex-interest date is practical having regard to the circumstances; FINRA Rule 11150 and FINRA Rule 11140 share parallel structures and were amended in tandem for both the 2017 T+2 and 2024 T+1 settlement cycle transitions, though FINRA Rule 11150's narrower bond-focused scope has resulted in a somewhat shorter amendment history overall; and the rule was last amended effective May 28, 2024 through SR-FINRA-2023-017, with prior amendments effective February 9, 1968, March 18, 1983, SR-NASD-91-13 effective November 1, 1991, SR-NASD-94-56 effective June 7, 1995, SR-FINRA-2010-030 effective December 15, 2010, and SR-FINRA-2016-047 effective September 5, 2017, with five selected notices — 83-69, 91-63, 10-49, 17-19, and 24-04.