Due Bill Period

What Is Due Bill Period?

In the context of [corporate actions](/corporateaction, for example, the issuance of dividends, due bill period is the time during which due bills are utilized.

A due bill documents and explains a stock dealer's obligation to deliver a pending dividend or another form of payment to the stock's buyer. Due bills are likewise utilized in other types of events, like the issuance of rights and warrants, and stock splits.

Understanding Due Bill Period

Due bills function as promissory notes and guarantee that the correct owner gets a stock's dividend when the stock trades close to its ex-dividend date (ex-date). They are useful during this interim period when trades are still settling. This period often extends from one day after the record date to one day after the ex-date, when payment is due.

In the past, security transactions were done manually rather than electronically. Investors would need to wait for the delivery of a physical security (in certificate form) and wouldn't pay until the reception. Since delivery times could differ and prices could fluctuate, market regulators required parties to deliver the securities and cash in a set period of time. Settlements are undeniably more streamlined today, with the due bill period explaining the interaction.

For certificates of deposit (CDs) and commercial paper, the transaction settles around the same time; for U.S. Treasuries, it is the next day (T+1), while foreign exchange or forex transactions settle in two days (T+2).

Clearing brokers are exchange individuals, who assist with guaranteeing that trades settle appropriately and transactions are effective. Clearing brokers are likewise responsible for maintaining paperwork associated with the clearing and executing of a transaction.

New Canadian Initiative for the Due Bill Period

In 2017, the Canadian securities industry set out on another initiative, called "due bill" tracking, to further develop tracking in client accounts for major corporate events like stock-splits or side projects. The goal of the initiative was to standardize this practice across Canada and U.S. also, further develop valuation reporting.

Canada trusts that better due bill processing will result in more accurate and timely reporting and eliminate errors that happen from a manual cycle. For inter-listed securities between Canada and the U.S., Canada trusts the new cycle will keep away from confusion.

The industry will typically use due bills when a security reports a distribution representing 25% or a greater amount of the value of its listing. Ordinary dividends won't probably have due bills attached, and their ex-dates will continue to be two days prior to the record date.