FINRA Rule 11362

FINRA Rule 11362 sits within the 11300 Delivery of Securities subsection of the 11000 Uniform Practice Code as the second of the five security-type-specific units of delivery rules, immediately following FINRA Rule 11361's units of delivery framework for stocks and immediately preceding FINRA Rule 11363's units of delivery framework for unit investment trust securities.

The $1,000/$100 Denomination Standard and Its Origins in Coupon Bond Practice

FINRA Rule 11362's framework is built around a $1,000 principal amount as the standard bond unit, with $100 as the divisor that allows that standard unit to be broken into smaller, aggregable pieces — a structure that mirrors, at the bond level, the 100-share round-lot and odd-lot structure FINRA Rule 11361 establishes at the stock level. 

Just as FINRA Rule 11361(a) treats 100 shares as the basic modular unit for stock certificates with various denominations permitted so long as they aggregate correctly, FINRA Rule 11362(a) and (b) treat $1,000 principal amount as the basic modular unit for bonds, with $100 denominations — and multiples thereof — permitted so long as they aggregate to that $1,000 standard.

This $1,000/$100 framework traces to the coupon bond era that FINRA Rule 11362's 1968 origin reflects. Coupon bonds — bearer instruments with physical interest coupons attached, redeemable by whoever physically presented them — were traditionally issued in standard denominations, with $1,000 being among the most common standard bond denomination and $100 representing a frequently-used smaller denomination that could be combined in multiples to reach the $1,000 standard. FINRA Rule 11362(a)'s framework — denominations of $1,000, or denominations of $100 or multiples thereof aggregating $1,000 — directly reflects this coupon bond denomination convention, much as FINRA Rule 11361's 100-share standard reflects the equity round-lot convention of the same era.

FINRA Rule 11362(a): Coupon Bonds

FINRA Rule 11362(a) establishes the denomination framework for bonds or similar evidences of indebtedness in coupon bearer form — each delivery shall be made in denominations of $1,000 or in denominations of $100 or multiples thereof aggregating $1,000. This framework provides the same kind of flexibility this dictionary observed in FINRA Rule 11361(a)(1) and (a)(2) for stocks — a $1,000 bond may be delivered as a single $1,000 certificate, or as multiple $100 certificates (or multiples of $100, such as $200 or $500 certificates) that together aggregate to $1,000. 

The phrase or multiples thereof aggregating $1,000 confirms that the $100 denomination is itself a modular building block — $100, $200, $300, $400, or $500 certificates, in whatever combination sums to $1,000, all satisfy the requirement.

The bearer form characterization is significant — coupon bonds in bearer form are payable to whoever physically holds them, without any registration of ownership on the issuer's books. This bearer characteristic means that the physical certificate itself is the operative instrument of ownership, making the denomination in which that physical certificate is issued a matter of direct practical consequence for delivery — unlike registered securities, where ownership is recorded on a register independent of any physical certificate's denomination, a bearer coupon bond's denomination is inseparable from the physical instrument being delivered.

FINRA Rule 11362(b): Registered Bonds and the $100,000 Ceiling

FINRA Rule 11362(b) establishes the parallel framework for fully registered bond issues — each delivery shall be made in denominations of $1,000 or multiples thereof or in amounts of $100 or multiples aggregating $1,000, but in no event in denominations larger than $100,000.

The structural parallel to paragraph (a) is evident — the same $1,000 standard unit and $100 divisor framework applies. But paragraph (b) introduces an additional element absent from paragraph (a) — denominations of $1,000 or multiples thereof, language that explicitly contemplates registered bond certificates issued in denominations larger than $1,000 itself, such as $5,000, $10,000, or $50,000 certificates — a possibility that makes sense for registered securities, where the certificate's denomination need not correspond to any physical bearer-instrument constraint and can instead simply reflect a registered holder's actual position size.

This or multiples thereof flexibility for registered bonds is then bounded by paragraph (b)'s explicit ceiling — but in no event in denominations larger than $100,000. This $100,000 ceiling establishes an outer limit on how large a single registered bond certificate's denomination may be for delivery purposes under FINRA Rule 11362(b), regardless of how large the underlying position or contract might be. A delivery of, for example, $500,000 in registered bonds could not be satisfied by a single $500,000 certificate — it would need to be delivered as multiple certificates, none exceeding $100,000 in denomination, that together aggregate to $500,000.

The presence of this $100,000 ceiling for registered bonds, with no corresponding ceiling stated in paragraph (a) for coupon bonds, may reflect the different practical contexts of the two instrument types — coupon bonds, being bearer instruments traditionally issued in smaller standard denominations as discussed above, may not have presented the same potential for arbitrarily large single-certificate denominations that registered bonds' or multiples thereof flexibility could otherwise permit, making an explicit ceiling less necessary for the coupon bond context paragraph (a) addresses.

FINRA Rule 11362(c): Bonds Issued in Both Coupon and Registered Form

FINRA Rule 11362(c) addresses a category of bond issue that presents a choice between the coupon and registered forms that paragraphs (a) and (b) separately address — unless otherwise specified at the time of execution, contracts in bonds that are issuable in either coupon or registered form shall be settled by delivery of bonds in either form pursuant to the denominations in paragraphs (a) and (b) of this Rule, notwithstanding that there may be a charge for interchanging one form with the other.

This default rule establishes that, absent an at-the-time-of-execution specification to the contrary, the delivering party has the choice between coupon form (governed by paragraph (a)'s denomination framework) and registered form (governed by paragraph (b)'s denomination framework, including its $100,000 ceiling) when settling a contract in a bond issue that is issuable in both forms. The notwithstanding clause addresses a potential complication — interchanging between coupon and registered form for a given bond issue may itself carry a charge, imposed by the issuer's transfer agent or similar party for processing the conversion from one form to the other. FINRA Rule 11362(c) confirms that the existence of such an interchange charge does not itself constrain the delivering party's choice between the two forms under this default rule — the delivering party may deliver in either form pursuant to paragraphs (a) or (b) as applicable, notwithstanding that doing so (if it requires converting the bonds from one form to the other) might trigger such a charge.

The unless otherwise specified at the time of execution qualifier preserves the parties' freedom to agree, at the outset of their contract, on a specific form — coupon or registered — for the bonds to be delivered, displacing paragraph (c)'s default either-form rule when the parties have made such a specification.

FINRA Rule 11362(d): Units of Delivery by Agreement for Non-$100-Multiple Principal Amounts

FINRA Rule 11362(d) addresses the residual category that paragraphs (a) through (c) do not directly accommodate — when a contract relating to paragraphs (a), (b) and (c) of this Rule 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.

This provision confirms that FINRA Rule 11362's entire $1,000/$100 framework presupposes principal amounts that are multiples of $100 — paragraphs (a) through (c) each describe denominations and aggregations built from $100 increments. A contract for a principal amount that is not itself a multiple of $100 — for example, a contract for $1,050 in bonds — falls outside this framework's built-in accommodation. Rather than leaving such contracts without any units-of-delivery resolution, paragraph (d) requires the parties themselves to agree on the proper units of delivery at the time of entering into the contract.

This by-agreement resolution for non-$100-multiple principal amounts stands in notable contrast to FINRA Rule 11361's treatment of its analogous residual category — FINRA Rule 11361(a)(3) and (a)(4) directly address transactions involving odd-lot share quantities (quantities not in multiples of 100 shares) through the rule's own built-in framework, providing specific permissible denominations for such odd-lot transactions without requiring separate party agreement. FINRA Rule 11362(d), by contrast, does not attempt to extend the $1,000/$100 bond denomination framework to accommodate non-$100-multiple principal amounts through any built-in formula — it simply requires the parties to work out the proper units of delivery themselves, by agreement, at the contract's inception.

This difference may reflect the different practical frequency and character of odd-quantity transactions in the two markets — odd-lot share transactions, addressed by FINRA Rule 11361(a)(3) and (a)(4), may have been common enough in equity trading practice to warrant a standardized built-in framework, while bond transactions for principal amounts not in multiples of $100 may have been sufficiently unusual, or sufficiently varied in their specific circumstances, that a case-by-case by-agreement approach was considered more appropriate than attempting to formulate a general rule.

The 1968, 1971, and 1973 Amendments

FINRA Rule 11362's amendment history — effective dates of July 8, 1968, November 1, 1971, and January 1, 1973, followed by the December 15, 2010 Consolidated Rulebook transfer through SR-FINRA-2010-030, with no amendments since — places the rule's substantive framework, like FINRA Rule 11361's, firmly within the late 1960s and early 1970s period that produced much of the Uniform Practice Code's foundational delivery infrastructure. The shared July 8, 1968 effective date with FINRA Rule 11361 suggests both rules' core frameworks were established as part of the same broader 1968 rulemaking addressing units of delivery across the major security types the Uniform Practice Code's delivery framework needed to address — stocks under FINRA Rule 11361 and bonds under FINRA Rule 11362.

Connection to FINRA Rules 11150, 11170, 11361, and 11363 Through 11365

FINRA Rule 11362 connects to FINRA Rule 11150's ex-interest framework for flat-traded bonds — both rules address operational dimensions of bond delivery and settlement, with FINRA Rule 11362's denomination framework establishing what physical units of a bond are delivered, complementing FINRA Rule 11150's determination of when a bond trades with or without accrued interest rights. It connects to FINRA Rule 11170's part-redeemed bonds settlement price formula — a part-redeemed bond's settlement price, calculated by reference to its original principal amount under FINRA Rule 11170, must still be delivered in units conforming to FINRA Rule 11362's denomination framework, with FINRA Rule 11362(d)'s by-agreement provision potentially becoming relevant where a part-redemption has left a bond's effective remaining principal at an amount not in a multiple of $100. It connects to FINRA Rule 11361 — its structural counterpart for stocks, sharing a parallel modular-unit-with-flexible-aggregation approach built around a standard unit ($1,000 for bonds, 100 shares for stocks) and a divisor ($100 for bonds, implicit smaller share denominations for stocks), and sharing the same July 8, 1968 origin date. And it connects to FINRA Rules 11363 through 11365 — the remaining units of delivery rules for unit investment trust securities, certificates of deposit for bonds, and securities traded as units or bonds with stock attached, which this dictionary anticipates may draw upon or adapt elements of both the FINRA Rule 11361 stock framework and the FINRA Rule 11362 bond framework examined in these two entries, given that certificates of deposit for bonds and bonds with stock attached inherently combine characteristics of the security types these two rules separately address.

Examination Relevance and Key Takeaways

FINRA Rule 11362 is tested on the Series 7 and Series 24 examinations as the units of delivery framework for bonds — establishing the $1,000/$100 denomination structure for coupon and registered bonds, the either-form default for bonds issuable in both forms, and the by-agreement fallback for non-$100-multiple principal amounts.

The key points to retain are these: FINRA Rule 11362(a) requires coupon bonds in bearer form to be delivered in denominations of $1,000, or in denominations of $100 or multiples thereof aggregating $1,000; FINRA Rule 11362(b) requires fully registered bonds to be delivered in denominations of $1,000 or multiples thereof, or in amounts of $100 or multiples aggregating $1,000, but never in denominations larger than $100,000; FINRA Rule 11362(c) provides that — absent a contrary specification at execution — contracts in bonds issuable in either coupon or registered form may be settled by delivery in either form under the paragraph (a) or (b) denominations respectively, notwithstanding any interchange charge between the two forms; FINRA Rule 11362(d) requires the parties to agree at contract formation on the proper units of delivery whenever a contract's principal amount is not a multiple of $100 — a by-agreement residual category, in contrast to FINRA Rule 11361's built-in odd-lot framework for stocks; and the rule was amended December 15, 2010 through SR-FINRA-2010-030, with prior amendments effective July 8, 1968, November 1, 1971, and January 1, 1973 — no amendments since — and one selected notice, 10-49.