FINRA Rule 11361

Paragraph (b) requires that a properly executed Uniform Delivery Ticket — the form set forth as Supplementary Material .01 to FINRA Rule 11360, examined in this dictionary's immediately preceding entry — accompany the delivery of securities, with a footnote referencing the same 1971 Final Report of the Banking and Securities Industry Committee entitled Four Uniform Forms that underlies FINRA Rule 11210(b)'s Uniform Comparison requirement. FINRA Rule 11361 was amended by SR-FINRA-2010-030 effective December 15, 2010, with prior amendments effective July 8, 1968 and December 1, 1972 — no amendments have occurred since 2010. One selected notice is associated — Regulatory Notice 10-49.

FINRA Rule 11361 sits within the 11300 Delivery of Securities subsection of the 11000 Uniform Practice Code as the first of the security-type-specific units of delivery rules, immediately following FINRA Rule 11360's series marker and immediately preceding FINRA Rule 11362's units of delivery framework for bonds.

FINRA Rule 11361(a): The Four Contract-Size Categories

FINRA Rule 11361(a) establishes its framework around the 100-share standard — the round lot — as the organizing reference point for all four numbered subparagraphs, with each subparagraph addressing how stock certificates must be denominated depending on the relationship between the contracted quantity and this 100-share standard.

Paragraph (a)(1) addresses the simplest case — transactions for exactly 100 shares may be delivered in one certificate for the exact number of shares, or in certificates totaling 100 shares. This subparagraph confirms that for a standard round-lot transaction, the delivering party has flexibility in how the certificates are denominated — a single 100-share certificate satisfies the requirement, but so does any combination of certificates whose denominations sum to 100 shares, such as two 50-share certificates or four 25-share certificates.

Paragraph (a)(2) addresses transactions greater than 100 shares and a multiple of 100 — for example, 200, 300, 500, or 1,000 shares. For such transactions, delivery shall be in the exact amount of the contract, or in multiples of 100 shares, or in amounts from which units of 100 shares can be made, or a combination thereof equaling the amount of the contract. 

This subparagraph again provides substantial flexibility — a 500-share contract could be satisfied by a single 500-share certificate, by five separate 100-share certificates, by certificates in other denominations that can be combined into 100-share units, or by some combination of these approaches — provided the total equals the contracted amount.

Paragraph (a)(3) addresses transactions for more than 100 shares but not in a multiple of 100 — for example, 350 shares, representing 3 round lots (300 shares) plus a 50-share odd-lot. For such transactions, delivery shall be in multiples of 100 shares, or in amounts from which units of 100 shares can be made, or a combination thereof, plus either the exact amount for the odd lot or smaller amounts equaling the odd lot. 

This subparagraph separates the contracted quantity into its round-lot component and its odd-lot component, applying the same flexible multiples-of-100 framework from paragraph (a)(2) to the round-lot portion, while addressing the odd-lot portion separately — the odd lot itself may be delivered as a single certificate for the exact odd-lot amount, or as smaller certificates that together aggregate to the odd-lot amount.

Paragraph (a)(4) addresses transactions for less than 100 shares — pure odd-lot transactions, such as a 25-share or 75-share transaction with no round-lot component at all. For such transactions, delivery shall be in the exact amount of the contract, or for smaller units aggregating the amount of the contract — mirroring the flexibility of the odd-lot treatment in paragraph (a)(3)'s second half, but applied to the entire contracted quantity rather than merely an odd-lot remainder after a round-lot portion.

The Underlying Logic: Round-Lot Modularity with Odd-Lot Flexibility

Considered together, FINRA Rule 11361(a)'s four subparagraphs implement a coherent underlying logic — the round-lot unit of 100 shares functions as the basic modular building block for stock certificate denominations, with substantial flexibility built into how that modular unit may be assembled or subdivided, while any odd-lot component — whether the entire transaction in the case of paragraph (a)(4), or the remainder after round lots in the case of paragraph (a)(3) — receives its own parallel flexibility for denominations that aggregate to the odd-lot amount.

This modular approach reflects the practical reality of how stock certificates have historically been issued, held, and transferred — certificates may be issued in various denominations by transfer agents, accumulated through prior transactions in various combinations, and held in whatever denominations happen to result from a holder's transaction history. Rather than requiring that delivery occur in some single rigid denomination scheme that might require certificate splitting or combination before a delivery could be made, FINRA Rule 11361(a)'s flexible framework allows whatever certificate denominations a delivering party happens to hold — provided they sum correctly to the contracted amount, with the round-lot and odd-lot components properly accounted for — to satisfy the delivery obligation.

The Connection to FINRA Rule 11350's Odd-Lot Exception

FINRA Rule 11361(a)'s round-lot and odd-lot framework provides the essential vocabulary that FINRA Rule 11350's exception, examined in this dictionary's immediately preceding entry, depends upon. Recall that FINRA Rule 11350 requires a purchaser to accept a part delivery on any contract due, except where the portion remaining undelivered is an amount which includes an odd-lot which was not a part of the original transaction.

FINRA Rule 11361(a) clarifies what odd-lot means in this context — the shares left over after any multiples of 100 shares, such as the 50 shares in a 350-share contract. Applying FINRA Rule 11361(a)'s framework to the illustration this dictionary used in its FINRA Rule 11350 entry: a 500-share contract is, under FINRA Rule 11361(a)(2), a transaction greater than 100 shares and a multiple of 100 — it has no odd-lot component at all under FINRA Rule 11361's categorization. If the seller tenders a part delivery of 450 shares, the remaining 50 shares constitutes an odd-lot under FINRA Rule 11361(a)(4)'s less than 100 shares category — an odd-lot that did not exist in the original 500-share contract's categorization under paragraph (a)(2). FINRA Rule 11350's exception would therefore apply, and the purchaser would not be required to accept this 450-share part delivery.

By contrast, a 550-share contract is, under FINRA Rule 11361(a)(3), a transaction for more than 100 shares but not in a multiple of 100 — it already has a 50-share odd-lot component built into its original categorization. A part delivery leaving a 50-share remainder would not create a new odd-lot that was not part of the original transaction, since the original transaction already contemplated this odd-lot under paragraph (a)(3)'s framework — FINRA Rule 11350's exception would not apply, and the purchaser would be required to accept such a part delivery.

FINRA Rule 11361(b): The Uniform Delivery Ticket Requirement

FINRA Rule 11361(b) establishes the documentary requirement that connects this rule directly back to FINRA Rule 11360's Supplementary Material .01 examined in this dictionary's immediately preceding entry — a properly executed Uniform Delivery Ticket must accompany the delivery of securities. The footnote to this provision — specifications for use of the Uniform Delivery Ticket are contained in the Final Report of the Banking and Securities Industry Committee entitled Four Uniform Forms dated December 22, 1971 — uses language virtually identical to the footnote accompanying FINRA Rule 11210(b)'s Uniform Comparison requirement, confirming that both forms trace to the same 1971 standardization effort.

The placement of this Uniform Delivery Ticket requirement specifically within FINRA Rule 11361 — the stocks-specific units of delivery rule — rather than within FINRA Rule 11360 itself, where the form is actually set forth as Supplementary Material .01, might initially seem like an unusual drafting choice. However, this placement makes sense when considered alongside FINRA Rule 11360's role as a pure series marker carrying Supplementary Material but no operative rule text of its own, as this dictionary's FINRA Rule 11360 entry discussed — FINRA Rule 11360 holds the form, while FINRA Rule 11361, as the first substantive rule in the units of delivery cluster, is where the operative requirement to use that form is actually stated. Whether FINRA Rules 11362 through 11365 each separately restate this Uniform Delivery Ticket requirement, or whether FINRA Rule 11361(b)'s statement is intended to apply across the entire units of delivery cluster, is a question this dictionary will be positioned to address as it examines those subsequent rules.

The 1968 and 1972 Amendments: Pre-Decimalization Origins

FINRA Rule 11361's amendment history — effective dates of July 8, 1968 and December 1, 1972, followed by the December 15, 2010 Consolidated Rulebook transfer through SR-FINRA-2010-030, with no amendments since — places the rule's substantive framework among the oldest provisions examined in this dictionary's coverage of the Uniform Practice Code, alongside FINRA Rule 11110's 1968 origin discussed in this dictionary's earlier entry on the UPC Committee.

The 100-share round-lot standard that FINRA Rule 11361(a) is built around reflects a convention that, at the time of the rule's 1968 and 1972 origins, was deeply embedded in U.S. equity market structure — a convention that predates the decimalization of stock prices in the early 2000s and that has persisted, in terms of round-lot trading conventions, even as the specific operational significance of round lots versus odd lots has evolved with electronic trading. FINRA Rule 11361's continued reliance on the 100-share standard, unchanged through the 2010 Consolidated Rulebook transfer, confirms that this fundamental denomination convention has remained stable even as so many other aspects of securities market infrastructure — settlement cycles, electronic communication, depository-based book-entry settlement — have transformed dramatically since 1968.

Connection to FINRA Rules 11210, 11350, 11360, and 11362 Through 11365

FINRA Rule 11361 connects directly to FINRA Rule 11210(b) — whose Uniform Comparison requirement and 1971 Four Uniform Forms footnote parallel FINRA Rule 11361(b)'s Uniform Delivery Ticket requirement and identical footnote, the two forms together spanning the documentary chain from trade confirmation through delivery as discussed in this dictionary's FINRA Rule 11360 entry. It connects directly and substantively to FINRA Rule 11350 — whose odd-lot exception to the purchaser's mandatory part-delivery acceptance obligation depends entirely on the round-lot and odd-lot categorization framework FINRA Rule 11361(a) establishes. It connects to FINRA Rule 11360 — its parent series marker, from which FINRA Rule 11361(b) draws the Uniform Delivery Ticket Form set forth as that rule's Supplementary Material .01. And it connects to FINRA Rules 11362 through 11365 — the remaining units of delivery rules, which address bonds, unit investment trust securities, certificates of deposit for bonds, and securities traded as units or bonds with stock attached respectively, but not through FINRA Rule 11361's contract-size-based categorization approach: the bond rule sets denominations by bond form, the unit investment trust rule sets a minimum of a single unit, the certificates of deposit rule adopts the bond units, and the rule on units is a Committee ruling on quoting and dealing in separable securities separately rather than a denomination framework.

Applying Paragraph (a) to Mixed and Edge-Case Deliveries

Paragraph (a)(2) lists several forms for a contract that is greater than 100 shares and a multiple of 100. The certificates may be in the exact amount of the contract, in multiples of 100 shares, or in amounts from which units of 100 shares can be made. They may also be "a combination thereof equaling the amount of the contract". A single delivery can therefore mix the forms.

Consider a contract for 1,000 shares. The seller delivers one certificate for 500 shares, three certificates for 100 shares each, and four certificates for 60, 40, 70 and 30 shares. The 500-share and 100-share certificates are multiples of 100. The 60 and 40 make up one unit of 100, and the 70 and 30 make up another. Together the certificates equal the 1,000 shares contracted for, so the delivery meets paragraph (a)(2).

The exact-amount form has no size limit in the text. A contract for 20,000 shares may be settled by one certificate for 20,000 shares, because that is a certificate "in the exact amount of the contract".

Paragraph (a)(3) covers a contract for more than 100 shares that is not a multiple of 100. Its round-lot portion is delivered "in multiples of 100 shares, or in amounts from which units of 100 shares can be made, or a combination thereof". The odd lot is delivered in addition: "plus either the exact amount for the odd lot or smaller amounts equaling the odd lot". For a 350-share contract, a seller may deliver one certificate for 300 shares, which is a multiple of 100, together with certificates for 30 and 20 shares, which are smaller amounts equaling the 50-share odd lot.

Paragraph (a)(3) is worded differently from paragraphs (a)(2) and (a)(4). Those two paragraphs each list a certificate in "the exact amount of the contract". Paragraph (a)(3) does not. It lists only the round-lot forms, plus the odd lot as the exact odd-lot amount or smaller amounts equaling it. A single certificate for all 350 shares is neither a multiple of 100 nor a certificate for the 50-share odd lot, so it is not among the forms paragraph (a)(3) lists. Under paragraph (a)(3), the odd lot arrives as its own certificate or certificates.

Paragraph (a) Alongside Part Deliveries Under FINRA Rule 11350

FINRA Rule 11350 states: "The purchaser shall be required to accept a part delivery on any contract due provided the portion remaining undelivered is not an amount which includes an odd-lot which was not a part of the original transaction." Whether a remainder includes an odd lot is read against the contract as paragraph (a) classifies it.

Take a contract for 300 shares, a multiple of 100 under paragraph (a)(2). The seller delivers 200 shares and leaves 100 undelivered. The 100 shares remaining are a whole round lot and include no odd lot, so the purchaser must accept the part delivery.

Now take a contract for 350 shares, which under paragraph (a)(3) consists of multiples of 100 plus a 50-share odd lot. The seller delivers only the 50 odd shares and leaves 300 undelivered. The remainder of 300 includes no odd lot at all. The purchaser must accept the part delivery, because FINRA Rule 11350 looks at what remains undelivered, not at what was tendered.

The Uniform Delivery Ticket in Practice

Paragraph (b) states that "A properly executed Uniform Delivery Ticket must accompany the delivery of securities." The paragraph attaches no condition based on the size of the contract or of the delivery. A part delivery that a purchaser accepts under FINRA Rule 11350 is still a delivery of securities, so a properly executed Uniform Delivery Ticket must accompany it.

FINRA Rule 11100(d) adds a requirement about the ticket's contents: "The CUSIP number must be used on the Uniform Transfer Instruction Form, Uniform Delivery Ticket and the Uniform Comparison or Confirmation." A ticket that describes the stock by name but leaves out its CUSIP number does not meet that requirement, however complete the rest of the ticket is.

The form itself is set out as Supplementary Material .01 to FINRA Rule 11360. It carries separate fields for the trade date, the settlement date and the delivery date, alongside the quantity, the CUSIP number, the security description and the net amount.

When Certificates Are Delivered at All: Book-Entry Settlement Under FINRA Rule 11310

Paragraph (a) speaks of "Stock certificates delivered in settlement of contracts". FINRA Rule 11310(a) requires a member to "use the facilities of a securities depository for the book-entry settlement of all transactions in depository eligible securities with another member". Suppose a member sells to another member a stock that is depository eligible and already on deposit at a securities depository. The trade must settle by book-entry through the depository. The seller cannot choose instead to deliver certificates, whatever denominations it holds.

FINRA Rule 11310(g) takes some transactions out of that requirement. It states that the rule "shall not apply to any transactions where the securities to be delivered in settlement of the transaction are not on deposit at a securities depository and" the deliverer is unable to deposit them before the depository's same-day cut-off time (for same-day settlement) or its cut-off date for the issue. Suppose a seller holds a stock only in certificates that are not on deposit, and cannot deposit them before the depository's cut-off date for that issue. The book-entry requirement does not apply. If the seller delivers the certificates, they are stock certificates delivered in settlement of a contract, and their denominations must meet paragraph (a).

Time, Place and Payment for a Stock Delivery

FINRA Rule 11320 fixes where and when the certificates are delivered. Delivery is made "at the office of the purchaser". If the purchaser "maintains more than one office, delivery shall be made at the office with which the transaction was effected, unless delivery instructions are provided at the time of the transaction." A seller that delivers correctly denominated certificates, with a properly executed ticket, to a different office of the purchaser, without instructions given at the time of the transaction, has not delivered where FINRA Rule 11320(h) requires.

A seller sometimes tenders delivery before the stated time. For contracts under FINRA Rule 11320(b), (d) and (h), including a regular way contract, "acceptance shall be at the election of the purchaser, and rejection of such delivery by the purchaser shall be without prejudice to his rights." A purchaser offered correctly denominated certificates a day early on a regular way contract may therefore take them or turn them away, and turning them away does not affect its rights under the contract.

A delivery can fall due on a day that is not a business day. FINRA Rule 11320(e) states: "Contracts due on a day other than a business day shall mature on the next business day." A stock contract due on a Saturday therefore matures on the next business day, and the certificates and ticket are delivered then.

Payment accompanies delivery. Under FINRA Rule 11330, "The party making delivery shall have the right to require the purchase money to be paid upon delivery by certified check, cashier's check, bank draft or cash." A seller delivering the certificates may therefore insist on one of those four forms. It is not obliged to accept the purchaser's own uncertified company check in place of them.

Which Transactions the Rule Governs, and What Happens on a Failure to Deliver

FINRA Rule 11361 is part of the Uniform Practice Code. FINRA Rule 11100(a) makes the Code apply to "over-the-counter secondary market transactions in securities ... between members", subject to listed exceptions. The first exception is "transactions in securities between members which are compared, cleared or settled through the facilities of a registered clearing agency, except to the extent that the rules of the clearing agency provide that rules of other organizations shall apply." A stock trade between two members that is settled through a registered clearing agency, whose rules do not provide for other organizations' rules to apply, falls outside the Code, and paragraph (a)'s denominations do not govern it through the Code.

FINRA Rule 11361 says nothing about its own scope. Under FINRA Rule 11100(b), the Code's scope "may be expanded or limited in any Rule of this Code if specifically provided therein", so a rule silent on scope has the scope of FINRA Rule 11100(a). That scope covers transactions between members. A member's sale of stock to a customer that is not a member is therefore not a transaction to which the Code, and with it FINRA Rule 11361, applies.

A seller may fail to deliver the certificates at all. FINRA Rule 11100(c) states: "In trades between members, failure to deliver the securities sold, or failure to pay for securities as delivered, on or after the settlement date, does not effect a cancellation of the contract. The remedy for the buyer or seller is provided for by Rules 11810 and 11820 respectively unless the parties mutually consent to cancel the trade." If a selling member fails to deliver on the settlement date, the contract remains in force. The buying member's remedy is the buy-in under FINRA Rule 11810, unless both members agree to cancel the trade. The member in default "shall be liable for any damages which may accrue thereby".

Stocks Beside Bonds, Unit Investment Trusts and Units

The units of delivery rules that follow FINRA Rule 11361 do not all work the same way. For a stock contract that is not a multiple of 100 shares, paragraphs (a)(3) and (a)(4) themselves list the forms of delivery. The parties need to agree nothing about units. For bonds, FINRA Rule 11362(d) provides that "When a contract ... is for a principal amount which is not a multiple of $100, the parties shall agree, at the time of entering into the contract, as to the proper units of delivery." Two members who trade 350 shares of a stock without discussing units can still settle under paragraph (a)(3). Two members who trade a bond for a principal amount that is not a multiple of $100 were required to agree the units when they entered into the contract.

FINRA Rule 11362(b) caps registered bond certificates: delivery is to be made "in no event in denominations larger than $100,000." Paragraph (a) of the stock rule has no such cap. Its exact-amount form covers a single certificate for the whole of any contract that is a multiple of 100 shares.

Unit investment trust securities have their own rule. FINRA Rule 11363 states: "The minimum unit of delivery for Unit Investment Trust Securities shall be a single unit of the trust." A delivery of seven units of a unit investment trust is therefore measured against that one-unit minimum. It is not measured against the 100-share categories FINRA Rule 11361 sets for stocks.

FINRA Rule 11365 is a Ruling of the Committee, not a denomination rule. Where securities, such as a stock and warrants to buy it, are "physically separate instruments, transferable independently of one another, and not subject to any legal or technical condition which requires that they be kept together, good practice requires that they be quoted and dealt in separately and not as units." Where members nonetheless contract for a group of securities for some special reason, "they are cautioned to make adequate specification both at the time of trade and in their confirmation or comparison, so that uncertainty or misunderstanding in the settlement of the contract may be eliminated."

Settling Each Contract on Its Own Terms

Paragraph (a) is written contract by contract. It governs "Stock certificates delivered in settlement of contracts", and each subparagraph measures the certificates against "the transaction" and "the amount of the contract". A contract for fewer than 100 shares is delivered "in the exact amount of the contract or for smaller units aggregating the amount of the contract".

Suppose one member buys 60 shares of a stock from another member in one transaction and 40 shares of the same stock from the same member in a second transaction. The two contracts together come to 100 shares. Each is still a separate contract for fewer than 100 shares. The 60-share contract is settled by certificates for exactly 60 shares, or smaller certificates adding up to 60. The 40-share contract is settled by certificates for exactly 40 shares, or smaller certificates adding up to 40. A single 100-share certificate is not the exact amount of either contract, and it is not a smaller unit of either one. So it settles neither contract.

What It Means for the Ticket to Accompany the Delivery

Paragraph (b) states that "A properly executed Uniform Delivery Ticket must accompany the delivery of securities." The form set out as Supplementary Material .01 to FINRA Rule 11360 bears the statement "THE ATTACHED SECURITIES ARE DELIVERED AGAINST PAYMENT". The ticket is the document that travels with the securities it describes.

Suppose a delivering member fills in a Uniform Delivery Ticket and sends it to the purchaser by messenger the afternoon before delivery. The next day it delivers the certificates at the purchaser's office with no ticket. The ticket may be complete in every field, but it did not accompany the delivery, because it arrived separately from the securities it describes. The delivery of the certificates was made without a ticket accompanying it, as paragraph (b) requires.

Examination Relevance and Key Takeaways

FINRA Rule 11361 is tested on the Series 7 and Series 24 examinations as the units of delivery framework for stocks — establishing the round-lot and odd-lot certificate denomination categories that FINRA Rule 11350's part-delivery odd-lot exception depends upon.

The key points to retain are these: FINRA Rule 11361(a) establishes four contract-size categories for stock certificate delivery — exactly 100 shares, deliverable as one certificate for the exact amount or certificates totaling 100 shares; more than 100 shares and a multiple of 100, deliverable in the exact amount, in multiples of 100, in amounts from which 100-share units can be made, or a combination thereof; more than 100 shares but not a multiple of 100, deliverable with the round-lot portion following the multiples-of-100 framework and the odd-lot portion deliverable as the exact odd-lot amount or smaller aggregating amounts; and less than 100 shares, deliverable as the exact contracted amount or smaller aggregating units; this round-lot and odd-lot categorization framework is what gives operational meaning to FINRA Rule 11350's exception — a part delivery's remainder constitutes an odd-lot not part of the original transaction only when the original contract's FINRA Rule 11361(a) categorization did not already include that odd-lot; FINRA Rule 11361(b) requires a properly executed Uniform Delivery Ticket — the form set forth as Supplementary Material .01 to FINRA Rule 11360, tracing to the 1971 Four Uniform Forms report alongside FINRA Rule 11210(b)'s Uniform Comparison — to accompany the delivery of securities; and the rule was amended December 15, 2010 through SR-FINRA-2010-030, with prior amendments effective July 8, 1968 and December 1, 1972 — no amendments since — and one selected notice, 10-49.