Good Delivery

Good Delivery

Good delivery means the transfer of ownership of a security from seller to buyer without impediment—i.e., all legal, documentary, and physical or electronic requirements for delivery have been satisfied. It is a necessary condition for settlement: if delivery is not “good,” the buyer may not be able to take or register the asset.

Why it matters

• Ensures buyers receive authentic, properly endorsed, and correctly denominated instruments.
• Protects market integrity by preventing failed or disputed settlements.
• Forms the basis of standardized clearing and settlement practices used by exchanges and clearinghouses.

How good delivery works

Historically, transfer agents and manual inspection authenticated paper certificates, endorsements, and registration details. Today, electronic trading, centralized depositories, and automated clearing systems handle most checks, reducing manual errors and speeding settlement. However, restrictions (legal, contractual, or regulatory) can still block delivery and prevent settlement.

Common criteria by market

Stocks
– Certificates must be in acceptable physical condition (if paper), properly endorsed, and denominated to match the transfer.
– Markets that enforce round lots typically use 100-share units; acceptable deliveries include:
– Multiples of 100 shares (100, 200, 300…).
– Divisors of 100 (1, 2, 4, 5, 10, 20, 25, 50, 100).
– Combinations that sum to the required total (e.g., 40 + 60).
– Many modern markets accept odd lots or fractional shares, reducing denomination constraints.

Bonds
– Good delivery is usually in specified multiples of par value (commonly $1,000, sometimes $5,000) and may have a maximum par value per certificate.
– Bearer bonds must be delivered with any unpaid coupons attached.

Commodities (example: physical gold)
– Exchanges set explicit specs incorporated into futures contracts. For example, the London Bullion Market Association (LBMA) good delivery rules for gold include:
– Minimum fineness: 995.0 parts per thousand.
– Marks: serial number, refiner’s hallmark, fineness, year of manufacture.
– Weight: 350–430 troy ounces (approx. 11–13 kg).
– Recommended dimensions and permitted undercut slope ranges.

Special cases and restrictions

• Restricted or insider stock may carry transfer limitations (e.g., lock-up agreements, rights-of-first-refusal). Such restrictions can prevent or delay good delivery.
• Regulatory provisions (e.g., U.S. SEC Rule 144) may permit sales of certain restricted securities only when specific conditions are met.

Key takeaways

• Good delivery is the unimpeded transfer of a security that meets all required conditions for settlement.
• Modern electronic systems automate most verification, but denomination rules, physical condition, documentation, and legal restrictions still govern deliverability.
• Criteria vary by asset class and exchange; exchanges and clearinghouses publish the specific rules that define good delivery for each market.

Selected sources

• U.S. Securities and Exchange Commission — Rule 144: Selling Restricted and Control Securities.
• London Bullion Market Association — Good Delivery List (gold specifications).