WHEN ISSUED

The term WHEN ISSUED (WI) is short for “when, as, and if issued,” referring to transactions made on a conditional basis because a security, although authorized, has not yet been formally issued. This is an anticipatory trading mechanism where the securities traded are yet to be available for delivery.

Types of When Issued Securities

When Issued securities can include:

• New Issues of Stocks and Bonds: These are securities announced but not yet issued.
• Stock Splits: Transactions based on stocks that have been announced to split but the split has not yet occurred.
• U.S. Treasury Securities: Newly announced U.S. Treasury bonds or bills awaiting issuance.

Special Considerations in WI Transactions

When trading WI securities, the terms are conditional. This means that the transaction is contingent upon the actual issuance of the securities. Traders engage in these transactions based on the anticipated future value of the securities:

• Market Listings: In financial listings, WI next to a price indicates such a security is being traded conditionally.
• Risk Factors: WI trading carries particular risks, as the issuance of the securities may not occur as anticipated.
• Settlement: The settlement of the transaction happens once the securities are formally issued and delivered.

Applicability

WI transactions are primarily found in markets with highly liquid securities, such as the U.S. Treasury market, where the regular auction of new issues necessitates such a trading mechanism. Similar scenarios are seen in major stock exchanges globally where large corporate entities announce new issuances or stock splits.

Comparisons

• Forward Contracts: Involve agreements to buy/sell a security at a future date, but the security is already issued.
• Futures Contracts: Standardized agreements for future delivery of commodities or securities, distinct from the conditional nature of WI transactions.

Related Terms

• Authorized Stock: Shares authorized for issuance but not necessarily fully issued.
• Pre-market Trading: Trading that occurs before the official market opens but involves already issued securities.
• Conditional Order: An order to buy or sell a security that becomes active only under certain conditions.

FAQs

• What happens if the security is never issued? If the security is not issued, then the transactions conducted on a when-issued basis are nullified, and no exchange of cash or securities takes place.

• Why do investors engage in WI transactions? Investors participate in WI transactions to lock in prices and manage expectations around the impending issuance based on market sentiment and anticipated value.

• How is WI trading regulated? WI trading is regulated by financial market regulatory bodies, such as the SEC in the United States, which set guidelines and rules governing such transactions.