Fungibility meaning

What does this Practice Note cover? The primary emphasis of this Practice Note is on debt securities (such as bonds or notes) and it provides an introduction to: trading, settlement and custody of debt securities in the UK, and the key UK regulatory frameworks that govern these activities This Practice Note also highlights the main categories of relevant service providers and summarises the UK regulatory frameworks applicable to them. For a quick summary of how the debt capital markets are regulated in the UK, see Practice Note: EU and UK regulation of the debt capital markets—one minute guide. For information on the debt securities market infrastructure in the EU, see Practice Note: EU Debt securities market infrastructure. Introduction The importance of tradeability of debt securities Tradeability is a fundamental attribute of debt securities. Investors’ ability to purchase and sell—trade—debt securities depends on: standardisation of the terms and conditions of debt securities (for more information, see Practice...

What does this Practice Note cover? This Practice Note sets out the concept of fungibility and its practical importance for additional issuances of debt securities. When are debt securities fungible? Debt securities, and other assets, are fungible when they are largely indistinguishable and can be exchanged freely for trading purposes. Fungibility is a fundamental attribute of debt securities issued on the same date as part of a single series. Such instruments are, as a rule, issued on identical terms and are interchangeable for all purposes. When the securities are traded, the seller can complete settlement by delivering the traded nominal amount of the securities, with no need to deliver any specific individual securities. Without this characteristic, trading the securities would be practically impossible. For information on trading debt securities, see Practice Note: UK Debt securities—trading, settlement and custody. Historically, fungibility was a material question for same‑day, single‑series issues when debt securities were produced in definitive bearer form—each security being an individual, negotiable, security‑printed document, typically bearing a...

Introduction The ability to trade is fundamental to debt securities. Investors’ capacity to buy and sell them rests on: standardisation of terms and conditions (see Practice Notes on Terms and conditions of debt securities and Terms and conditions—first time issuer's guide) the fungible nature of the instruments (see Practice Note: Key legal issues in English law in debt capital markets—fungibility) the presence of a secure, efficient and liquid market—allowing rapid, straightforward sales at steady prices This market relies on a wide-ranging framework of systems and services, grouped into four main areas: mechanisms that generate, sustain, or provide access to liquidity (trading infrastructure) arrangements that remove counterparty non-completion risk in concluded sale and purchase contracts (clearing infrastructure) systems that facilitate delivery of securities from one holder to another in fulfilment of an agreed sale and purchase or other transaction...