Quick Answer
A DK notice asks the contra-member to confirm or DK a trade, and research is the recipient's separate duty after receipt. The procedure does not reach trades that clear through a registered clearing organization. Under the alternative form, silence is a DK. Aged securities fails require separate confirmation.
Comparison, a DK, and a delivery fail answer different questions. First determine whether the parties agree that the trade occurred. Then determine whether the confirmed trade settles.
When Does the DK Sequence Start?
A signed DK communicates that the contra-member does not recognize the trade as claimed. Silence is not yet a DK. It triggers the confirming member's option to send a notice that requires the contra-member to research and answer.
Exam Tip: Gotchas
The initiating notice does not mean its sender has DK'd the trade. The confirming member claims the trade and asks the contra-member to confirm or DK it.
What Happens After the Contra-Member Responds?
| Result | Operational consequence |
|---|---|
| The contra-member sends a DK | The parties still lack agreement that the claimed trade occurred. |
| The contra-member does not respond | A lack of response constitutes a DK. |
How Can a DK Issue Lead to a Delivery Fail?
A DK issue does not itself become a delivery fail. The contra-member must first confirm the trade, after which normal settlement can proceed. If the required securities are then not delivered, the confirmed trade has a delivery fail.
Confirmation of an aged securities fail is a separate topic. An aged securities fail remains a delivery problem and requires confirmation.
Once an aged delivery fail is established, the Buy-Ins and Close-Outs of Fails lesson carries the procedures and deadlines for resolving it.
Exam Tip: Gotchas
A DK and a delivery fail occur at different stages. A DK concerns agreement that the trade occurred. A delivery fail concerns securities not delivered for a confirmed trade.
What Should You Check on Exam Day?
- For a member-to-member trade outside a registered clearing organization's process, start the DK sequence after comparison, not after a missed securities delivery.
- The confirming member may send a DK notice.
- For a member-to-member trade outside a registered clearing organization's process, a lack of response constitutes a DK.
- If the contra-member confirms, complete normal settlement. If required securities are then not delivered, classify the problem as a delivery fail.
- If a question establishes an aged delivery fail, separate it from a DK and require confirmation.