Definition
When Issued (WI) refers to a conditional transaction in which a security has been authorized but has not yet been formally issued. This status allows for the trading of Treasury securities, stock splits, and new issues of stocks and bonds on a speculative basis prior to their actual issuance.
When Issued vs. Regular Trading
| When Issued (WI) | Regular Trading |
|---|---|
| Conditional orders are placed based on expected issuance. | Actual securities are already issued and available for trading. |
| Trades may not be completed if issuance is canceled. | Trades are completed based on the current market price. |
| Provides insight into market interest and valuation prior to issuance. | Reflects current market conditions and pricing of available securities. |
Related Terms
- Underwriter: A financial institution that arranges the issuance and distribution of new securities.
- New Issue: A type of security that is being sold for the first time.
- Subscription: An agreement to purchase a security before it is formally issued.
Examples
- When Issued Treasury Securities: Investors can trade Treasury securities on a WI basis once the U.S. Treasury announces the offering period, even before the actual securities are issued.
- New Stock Offerings: A company planning to issue new stock may allow investors to place WI orders that will convert to formal trades once the stock is issued.
Humorous Insight
“Buying on a when-issued basis is a bit like ordering a pizza without the toppings: you know it’s coming, but there’s always that chance it might not be as delicious as you hoped!” 🍕😄
Fun Fact
Did you know? The concept of “when issued” trading dates back to the mid-20th century but has become increasingly significant with the growth of the financial markets—think of it as a sneak peek before the grand opening! 🎉📈
Frequently Asked Questions
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What happens if a WI transaction is canceled? If a security is not issued, all orders placed on a when-issued basis are canceled, and no trades take place.
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How is market interest gauged before issuance? When issued transactions can indicate the level of interest investors have in a new issue based on the volume and price of WI trades.
Resources for Further Study
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Books
- “The Intelligent Investor” by Benjamin Graham - An essential read for understanding investment principles, including new issues and market trading.
- “A Random Walk Down Wall Street” by Burton Malkiel - A comprehensive guide to understanding market movements, including WI dynamics.
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Online Resources
- Investopedia’s Guide to When Issued: A thorough explanation of when-issued trading.
- SEC.gov on New Issues: Updates and regulations by the U.S. Securities and Exchange Commission.
graph TD;
A[WI Transactions] --> B[Authorized Securities]
A --> C[Trading Speculations]
A --> D[Potential Trades not Guaranteed]
B --> E[Example: Treasury Securities]
C --> F[Example: New Stock Issuance]
Test Your Knowledge: When Issued Transactions Quiz
## What does it mean for a security to be "when issued"?
- [x] It has been authorized but not yet formally issued.
- [ ] It is fully issued and available for immediate trading.
- [ ] It is canceled and will not be issued.
- [ ] It was issued in the past but is not currently traded.
> **Explanation:** A security labeled as "when issued" signifies that it has received approval but remains unissued, meaning trading can be conditionally placed on a not-yet-existent asset.
## When might WI trades not be completed?
- [x] If the issuance is canceled.
- [ ] If the market rate increases.
- [ ] If the issuing company holds too many public shares.
- [ ] If the underwriters withdraw.
> **Explanation:** WI trades may not be completed mainly if the issuance is canceled, truly reflecting the conditional nature of such transactions.
## Who typically initiates WI orders?
- [ ] Buyers who want a guaranteed return.
- [x] Investors wishing to speculate on the upcoming issue.
- [ ] Brokers standing by for immediate sell orders.
- [ ] Congress approving new funding.
> **Explanation:** Investors interested in speculative trades often initiate WI orders to secure their positions before the formal issuance.
## What could a WI market indicate about a new issue?
- [x] The level of interest from potential investors.
- [ ] The final sale price of the issued security.
- [ ] Future dividends on the stock.
- [ ] Regulations affecting stock ownership.
> **Explanation:** The volume and pricing in the WI market offer insights into investors' interest and market perception of the upcoming issue.
## What is typically a key risk in when-issued transactions?
- [ ] Transaction fees being too high.
- [x] The possibility that the issuance may not occur.
- [ ] Competitors pulling similar offers.
- [ ] Market liquidity vanishes.
> **Explanation:** The uncertainty over whether or not a security will actually be issued is the primary risk associated with WI transactions.
## Which of the following securities can be traded using a when issued basis?
- [x] New stock issues and Treasury securities.
- [ ] Only government bonds.
- [ ] Only common stocks without dividends.
- [ ] Only risky startup companies.
> **Explanation:** Various types of securities, including new stock issues and Treasury securities, can indeed be traded on the when-issued basis.
## What aspect does a WI market primarily address?
- [ ] The issuance procedures.
- [x] The speculative trading activities.
- [ ] The legal verification of securities.
- [ ] Historical trading patterns.
> **Explanation:** The WI market facilitates speculative projects where efforts to trade occur prior to the formal release of securities.
## Is it possible to lose money on a WI transaction?
- [x] Yes, if the transaction is canceled before completion.
- [ ] No, WI transactions are guaranteed or refunded.
- [ ] Only if invested in high-risk stocks.
- [ ] Only if you forget the initial purchase date.
> **Explanation:** If the unconditional event fails (the issuance does not proceed), investors could quickly lose all potential entered investments.
## What is the role of an underwriter in WI transactions?
- [x] To facilitate the securities offering before issuance.
- [ ] To combat fraud in the securities market.
- [ ] To ensure investors are fully informed.
- [ ] To complete the stock valuation before any sale.
> **Explanation:** Underwriters play a critical role in managing and structuring the offering process, making it possible for WI transactions to occur.
## If I wanted to order shares on a "when issued" basis, would I:
- [x] Monitor announcements and request orders when issued.
- [ ] Automatically receive shares without any action.
- [ ] Have to create a new brokerage account unrelated to the current market.
- [ ] Get shares without any upfront payment?
> **Explanation:** Ordering WI shares requires diligence to monitor which new offerings arise and prompt action when they're available to order conditionally.
Thanks for diving into the whimsical world of finance! Always remember, just like stocks, laughter is best when shared! Keep learning and laughing! 😄📈
