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, paying agent or issuer 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 — seven listed amendment dates compared to FINRA Rule 11140's nine — reflecting FINRA Rule 11150's narrower scope and correspondingly fewer occasions for substantive amendment over the decades.

The earliest listed amendment 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 rule designating the UPC Committee whose discretionary authority is 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 in settlement of contracts made 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 and provision is made for additional contingent payment, so long as the fixed-rate payments are not in default and no intention to default has been announced, both of which directly depend on the ex-interest date that FINRA Rule 11150 establishes.

Working the Normal Ex-Interest Dates Through the Calendar

FINRA Rule 11150(a) states its three normal dates as fixed formulas. Each one turns on two facts: whether a record date has been fixed, and whether that date falls on a business day. Once those two facts are known, the ex-interest date follows from the text. Nobody needs to estimate it.

Take a flat-traded bond whose trustee has fixed a Monday as the record date for its next interest payment, where that Monday is a business day. The bond goes ex-interest on that Monday. It does not go ex-interest on the Friday before. Paragraph (a)(1) applies whenever the record date itself is a business day, and a weekend before the record date does not change that. Paragraph (a)(1) takes no account of the payment date either. If the payment is scheduled two weeks after the record date, the ex-interest date is still the record date.

Paragraph (a)(2) counts back to the first business day preceding a record date that is not a business day. That means it passes over every day that is not a business day, not just one calendar day. Suppose a bond's record date falls on a Sunday, the Friday before is a holiday that is not a business day, and the Thursday is a business day. The first business day preceding the record date is the Thursday, so the bond goes ex-interest on the Thursday.

Paragraph (a)(3) counts back from the payment date in the same way. Take an instrument traded flat with no record date fixed, whose next interest payment is due on a Monday. Saturday and Sunday are not business days, so the first business day preceding the payment date is the Friday before, and the instrument goes ex-interest on that Friday.

Paragraph (a)(3) applies only "if no record date has been fixed". Under FINRA Rule 11120(f), a record date is a date fixed by the trustee, registrar, paying agent or issuer to determine the holders entitled to receive interest. So a record date fixed by the issuer itself, with no trustee or paying agent involved, is still a record date. The bond's ex-interest date then comes from the record-date provisions of paragraphs (a)(1) and (a)(2), not from the payment date under paragraph (a)(3).

What the Rule Reaches: Bonds and Similar Evidences of Indebtedness Traded Flat

FINRA Rule 11150 is not limited to instruments called bonds. It reaches transactions in "bonds or similar evidences of indebtedness which are traded 'flat'". A note or debenture that trades flat is therefore within the rule, and its ex-interest date is set by paragraph (a) in the same way as a flat-traded bond's.

The rule's only exception is for "cash" transactions. It makes no exception for other settlement terms, such as seller's option, buyer's option or delayed delivery. A seller's option contract struck on the day a flat bond trades ex-interest is therefore an ex-interest trade, even though delivery comes later under the option. The later delivery does not bring the upcoming interest payment back into the contract.

Whether a bond trades flat can change, and when it does, the bond comes under this rule. FINRA Rule 11620(e) sets the rule for income bonds. They are dealt in flat even though they are paying interest, with one exception. Where the indenture guarantees a certain fixed rate and provides for an additional contingent payment, they are dealt in "and interest" at the guaranteed fixed rate, so long as interest payments at that fixed rate are not in default and no announcement of intention to default has been made. Suppose the issuer of such a bond announces that it intends to default on the fixed-rate payments. At that point the condition for "and interest" dealing fails before any payment has actually been missed. The bond is dealt in flat, and FINRA Rule 11150 then sets its ex-interest dates.

Dates the Rule Prescribes and Dates the Committee Designates

Paragraph (a) prescribes the normal ex-interest dates directly. It says transactions "shall be 'ex-interest' as prescribed by the following provisions". The equity counterpart works differently. Under FINRA Rule 11140(a), a security goes ex-dividend on the day the Committee specifically designates, or on the day an appropriate national securities exchange specifies, after definitive information has been received. In practice, a flat bond whose record date is a business day goes ex-interest on that date even if the Committee has made no designation. Under FINRA Rule 11150, the Committee's designation comes in only where paragraph (b) applies.

Paragraph (b) applies when notice of the interest payment "is not made public" far enough in advance. The test is whether the notice was public, not whether some members knew. Suppose a paying agent tells a few dealers privately, a week ahead, that an interest payment is coming, but the payment is not made public until the day before the record date. If that public notice was too late for the bond to be dealt in ex-interest under paragraph (a), paragraph (b) applies. The dealers' private knowledge does not change the result.

Late Deliveries Around the Record Date: The Due-Bill Check

FINRA Rule 11620(d) shows how the ex-interest date works when a delivery of a flat-traded security arrives late. A due-bill check for the full amount of the interest to be paid must accompany the delivery when two conditions are both met. First, the delivery is made after the record date. Second, it settles a contract made before the date on which the security was traded ex-interest. The first condition turns on when the security was delivered. The second turns on when the contract was made.

Consider two contracts in the same flat bond, both delivered after the record date. The first was made before the bond traded ex-interest, and the second was made after it. The first delivery must carry a due-bill check. The second need not, because that contract was not made before the ex-interest date. Late delivery by itself does not trigger the check. What matters is the date of the contract.

The delivery date matters in its own way. A contract made before the ex-interest date that is delivered before the record date does not meet the first condition. That delivery need not carry a due-bill check.

FINRA Rule 11630 explains what a due-bill check is. For interest on registered bonds, it is a due-bill in the form of a check payable on the date the interest is paid. Before that date it is treated as a due-bill, an instrument evidencing the seller's obligation, for the amount of the interest.

A late delivery does not undo the trade. Under FINRA Rule 11100(c), in trades between members, a failure to deliver the securities sold on or after the settlement date does not cancel the contract. So a seller that fails to deliver a flat bond before the record date still owes delivery under the contract. The buyer's remedy for the failure is the one FINRA Rule 11810 provides, the buy-in, under which a contract the seller has not completed may be closed by the buyer, unless the parties mutually consent to cancel the trade.

Bonds Traded "And Interest" by Comparison

A bond traded "and interest" is outside FINRA Rule 11150, which reaches only bonds traded flat. The Code deals with the same timing problem for such a bond differently. When a security traded "and interest" is delivered between the record date and the interest payment date, FINRA Rule 11620(c) requires a deduction equal to the full amount of the interest to be paid, made on settlement. The flat bond's due-bill check travels with the delivery. The "and interest" bond instead has an adjustment to the amount paid on settlement.

Principal Payments on Bonds: FINRA Rule 11160

The formulas in FINRA Rule 11150 also serve beyond interest. FINRA Rule 11160 provides that all transactions except cash transactions in stocks, bonds or similar evidences of indebtedness are "ex" liquidating payments or payments on account of principal in accordance with the formula set forth in FINRA Rules 11140 and 11150. A bond making a payment on account of principal therefore trades "ex" that payment under the formula of those two rules, not under a separate formula written for principal. As with interest, cash transactions are excepted.

The Committee Behind Paragraph (b)

The Committee that designates a late-information ex-interest date under paragraph (b) is the Uniform Practice Code Committee. FINRA Rule 11112 provides that a decision of the UPC Committee may be rendered by a panel of that Committee, consisting of three or more of its members, provided that no more than 50 percent of the panel's members are directly engaged in market making activity or employed by a member whose revenues from market making activity exceed ten percent of its total revenues. A designation made by a panel that meets those terms is a decision of the Committee.

Once the Committee's decision is final, members must carry it out. Under FINRA Rule 11111, it is conduct inconsistent with just and equitable principles of trade for any member to refuse to take any action necessary to effectuate a final decision of the UPC Committee under the Code. A member that refuses to take the action needed to settle its trades in a flat bond on the basis of a final paragraph (b) designation is within that provision.

The Committee also has power, under FINRA Rule 11110, to issue interpretations or rulings on how the Code applies. That power is limited to situations in which there is no substantial disagreement as to the facts. Suppose two members agree on what a bond's indenture says but differ over whether the bond is dealt in flat, and so over whether FINRA Rule 11150 governs its interest. The Committee may rule on that question. If the members disagree about the facts themselves, the question is outside the power FINRA Rule 11110 grants.

Trades Outside the Uniform Practice Code

FINRA Rule 11150 is a rule of the Uniform Practice Code, so it operates only within the Code's scope under FINRA Rule 11100(a). That scope covers over-the-counter secondary market transactions in securities between members, including restricted securities as defined in Securities Act Rule 144(a)(3), subject to listed exceptions. FINRA Rule 11150 does not itself expand or limit that scope.

Several kinds of flat-bond trade therefore fall outside the rule. A trade between members in a municipal security that trades flat is excluded from the Code, so FINRA Rule 11150 does not set its ex-interest date. A trade between members that is compared, cleared or settled through the facilities of a registered clearing agency is also excluded, unless the clearing agency's rules provide that other organizations' rules apply. A member's sale of a flat bond to its own customer who is not a member is not a transaction between members at all.

The Code does reach restricted securities. So an over-the-counter trade between two members in a flat-traded restricted debt security, settled directly between them, is within the Code, and FINRA Rule 11150 sets its ex-interest date.

Flat Trading Before Issuance: When-Issued Securities of Reorganized Companies

FINRA Rule 11130(b) applies flat trading and the ex-date to securities that do not yet exist. Transactions between members "when, as and if issued" or "when, as and if distributed" in income or contingent interest securities of new or reorganized companies are traded flat. Such a transaction carries all payments made or declared on the new securities from the effective date of the plan. That changes if a payment is made or declared before the settlement date. Transactions made on and after the "ex" date for that payment carry only payments made or declared from that ex date.

Consider a reorganized company whose income bonds are trading when issued. Before any when-issued contract settles, the company declares an interest payment on the bonds, and that payment has an ex date. Two members strike a when-issued contract in the income bonds after the ex date. Their contract carries only payments made or declared from that ex date, so it does not carry the payment already declared. A contract struck before that ex date still carries every payment from the plan's effective date, including the declared one.

The same plan can produce securities treated in two different ways. Under FINRA Rule 11130(b)(1), when-issued transactions between members in fixed obligations of such companies are "and accrued interest" to the date of settlement, unless the parties agree otherwise. So where a plan issues both fixed-rate notes and income bonds, when-issued trades in the income bonds are flat, and their interest is allocated through ex dates. When-issued trades in the fixed-rate notes, with no contrary agreement, settle with accrued interest instead.

Large Payments: FINRA Rule 11140(b)(2) Has No Counterpart in FINRA Rule 11150

FINRA Rule 11140(b) sorts equity distributions by size. A cash dividend or distribution of less than 25 percent of the value of the subject security takes its ex-dividend date from the record date. One of 25 percent or greater goes ex-dividend on the first business day following the payable date.

FINRA Rule 11150 makes no such distinction. Its normal dates depend only on whether a record date has been fixed, whether that date is a business day, and, where no record date has been fixed, on the date the interest payment is to be made. Take a flat-traded bond whose issuer announces, well in advance, an interest payment worth more than a quarter of the bond's market value. The bond goes ex-interest on the date paragraph (a) prescribes, however large the payment is. It does not go ex-interest on the first business day after the payment is made, as a stock paying a distribution of that relative size would go ex-dividend.

One Payment at a Time: The Ex-Interest Date and the Due-Bill Check

FINRA Rule 11120(d) defines the ex-date as the date on and after which a security is traded without "a specific dividend or distribution". A flat bond's ex-interest date under FINRA Rule 11150 therefore applies to one particular interest payment, the one whose record date or payment date paragraph (a) is applied to. A contract struck after the bond has gone ex-interest for its coming payment is ex that payment only. It still carries the following interest payment, which gets its own ex-interest date under paragraph (a) when that payment's record date or payment date comes round.

Where a late delivery of a flat bond must carry a due-bill check under FINRA Rule 11620(d), the amount on the check is an amount of interest. FINRA Rule 11620(f) applies in all transactions involving the payment of interest: a fraction of a cent equal to or greater than five mills is regarded as one cent, and a fraction of less than five mills is disregarded. So interest that computes to $18.7549 per bond is carried on the due-bill check as $18.75.

A Date Fixed for Another Purpose Is Not a Record Date

FINRA Rule 11150's normal ex-interest dates depend on whether a record date has been fixed. Paragraphs (a)(1) and (a)(2) work from the record date. Paragraph (a)(3) applies "if no record date has been fixed". The Uniform Practice Code defines the term. Under FINRA Rule 11120(f), a record date is the date fixed by the trustee, registrar, paying agent or issuer for the purpose of determining the holders entitled to receive dividends, interest or principal payments or any other distributions.

Suppose the trustee of a flat-traded bond fixes a date to determine which holders may consent to a proposed amendment of the indenture. That date is not fixed to determine the holders entitled to receive a payment or distribution, so it is not a record date in the Code's sense. If nobody has fixed a date to determine the holders entitled to the coming interest payment, no record date has been fixed for that payment. The bond then goes ex-interest under paragraph (a)(3), on the first business day preceding the date on which the interest payment is to be made. The consent date plays no part.

Trade Dates Across Time Zones

Whether a trade in a flat bond is an ex-interest trade depends on when it was made. FINRA Rule 11120(d) defines the ex-date as the date on and after which the security is traded without a specific dividend or distribution. So the trade date has to be known before FINRA Rule 11150's date can be applied to a trade.

The Code fixes the trade date for a transaction between time zones. Under FINRA Rule 11120(g), where the bid or offer is accepted in a later time zone than that of the originator, the correct trade date is the day on which the dealer in the later time zone accepts the trade. FINRA Rule 11121 gives the Committee's ruling on an example. A dealer in an Eastern city leaves a bid or offering with a dealer in a Western city, good until the close of the Western dealer's business day. The Western dealer accepts on that day, but its notice of acceptance reaches the Eastern dealer on the following day. The correct trade date is the day the Western dealer accepts, even though the acceptance may not reach the Eastern dealer until the following day.

Apply that to a flat-traded bond with no record date fixed, whose next interest payment is due on a Wednesday. Notice of the payment was made public well in advance, and Tuesday and Wednesday are business days. Under paragraph (a)(3) the bond goes ex-interest on the Tuesday. On the Monday, an Eastern dealer leaves a bid for the bond with a Western dealer, good until the close of the Western dealer's business day. The Western dealer accepts on the Monday, and its notice of acceptance reaches the Eastern dealer on the Tuesday. The trade date is the Monday. The trade was made before the ex-interest date, so it is not an ex-interest trade. If the Tuesday, when the acceptance arrived, were the trade date, the trade would have been made on the ex-interest date, but that is not how the trade is dated.

The "Flat" Designation on Confirmations

Whether a bond is traded flat decides whether FINRA Rule 11150 sets its ex-interest dates. The confirmation of a trade is where the two members record it. Under FINRA Rule 11220, confirmations or comparisons include an adequate description of the security, the price, and any other information deemed necessary to ensure that the buyer and seller agree as to the details of the transaction. That other information should include, if applicable, such phrases as "flat". So where two members trade a bond that trades flat, their confirmations should carry the phrase "flat" as well as the description and the price.

Distributions Other Than Interest on a Flat Bond

FINRA Rule 11150 deals only with interest. Its title and both of its paragraphs speak of "ex-interest", and paragraph (b) turns on notice of "payment of interest". It sets no ex-date for any other distribution on a flat-traded bond.

FINRA Rule 11140(a) is written in terms of securities generally. All transactions in securities, except cash transactions, are ex-dividend, ex-rights or ex-warrants on the day the Committee designates or an appropriate national securities exchange specifies. So if the issuer of a flat-traded bond distributes warrants to its bondholders, the date on which the bond trades ex-warrants comes from FINRA Rule 11140, not from FINRA Rule 11150. FINRA Rule 11160 does not supply it either, because that rule covers liquidating payments and payments on account of principal.

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.