trading – Miro Zecevic

On a company’s financial calendar, a quarter is a three-month period that serves as the foundation for quarterly financial reports and dividend payments.

The majority of financial reporting and dividend payments occur quarterly. Not all companies’ fiscal quarters match the calendar quarters, and it’s customary for businesses to complete their fourth quarter after their busiest season.

The fiscal quarter and the fiscal year are the two primary accounting periods for businesses. Most businesses’ fiscal years span from January 1 to December 31 (though it does not have to). The following are the traditional calendar quarters that make up the year:

– January, February, and March (Q1)
– April, May, and June (Q2)
– July, August, and September (Q3)
– October, November, and December (Q4)

Companies, investors, and analysts compare and assess trends using data from multiple quarters. A company’s quarterly report, for example, is frequently compared to the same quarter of the prior year. Many businesses are seasonal, making a comparison of quarterly results deceptive.

Quarterly Reports

For publicly listed corporations and their investors, quarterly earnings reports are critical. Each press release has the power to influence the stock price of a company. A company’s stock value may rise if it has a strong quarter. The value of the company’s shares might plummet if the company experiences a bad quarter.

After their first three fiscal quarters, all public corporations in the United States must file quarterly filings with the SEC, known as Form 10-Q. The prior three months’ unaudited financial statements and operating data are included in each 10-Q.

An annual report, known as Form 10-K, is also required of a publicly traded corporation. An audited statement, presentations, and additional disclosures are frequently included in annual reports that are more extensive than quarterly reports.

Forward-looking “guidance” for the following several quarters or through the end of the year is frequently included in quarterly earnings reports. Analysts and investors use these estimates to forecast performance over the next several quarters.

Quarterly Dividends

In the United States, most corporations that pay a dividend will spread it out across four quarters. It is common in many economies outside of the United States to divide the yearly dividend into quarterly installments, with one payment being significantly bigger than the rest.

When it comes to quarterly dividends, the ex-date might cause considerable volatility in a stock’s price.

Non-Standard Quarters

Some public corporations will adopt a non-standard or non-calendar quarterly reporting structure for a variety of reasons.

A corporation may use a non-traditional fiscal year to aid in business or tax planning. According to the IRS, companies can pick a “tax year” that is still 52–53 weeks long but does not finish in December.

Quarters’ criticism

The significance of the quarterly reporting method has been questioned by some. The main criticism of the system is that it places too much pressure on companies and executives to generate short-term outcomes to impress analysts and investors, rather than focusing on the business’s long-term objectives.

Another difficulty is that corporations only publish their summary annual statements once a year, causing the data to grow stale and out of date in the meantime.

What is a Fiscal Quarter?

A fiscal quarter is a three-month period during which a company’s financial performance is reported. A year is divided into four quarters, as the name indicates, and a publicly listed company would produce four quarterly reports every year.

Fiscal quarters are used by both companies and investors to keep track of their financial outcomes and company changes throughout time.

Are Quarters always lined up with the calendar year?

The calendar year may not necessarily correspond to the quarters. For example, if a corporation decides to start its fiscal year in February rather than January, the first quarter will be February, March, and April. Companies may do so if they want their fiscal year to conclude during their peak season.

What are the pros and cons of Quarterly Reporting?

The major benefit of quarterly reporting is that it provides investors with more data on which to make investment decisions. Investors might examine a company’s quarterly filings instead of waiting for its annual report to get a feel of how the company is doing throughout the year.

However, some say that quarterly reporting causes organizations and investors to be more focused on short-term success.

Have you ever traded penny stocks with a small account only to be frustrated when it came time to make another trade? Many people who invest in small-cap stocks are concerned by the Pattern Day Trade regulation.

To purchase and sell penny stocks or higher-priced stocks within a single day and more than three times during a rolling 5-day period, traders must have at least $25,000 in their trading account. In many circumstances (depending on your broker), you may avoid this by using a cash account.You can make as many day trades (buying and selling in the same trading session) as you like.However, you can only use the amount of settled funds in your account.

You must be mindful of settlement time-frames if you trade penny stocks.Your money will usually be settled two business days following the trade date (T+2).That implies you’ll have to wait a few days after selling out of your transaction before you may trade with those funds again. The “benefit” is that you are “forced” to refrain from over-trading.

On the other hand, you won’t be able to profit from market volatility as rapidly as you’d want.
If you’ve ever day traded with a smaller account, you’re all too familiar with this problem. However,
the US Securities and Exchange Commission (SEC) may be attempting to assist ordinary traders.

The Securities and Exchange Commission (SEC) submitted a document explaining a
potential adjustment to this settlement regulation earlier this month.

The SEC agreed to recommend rule changes to lessen risks in clearing and settling securities.
Shortening the normal settlement cycle for “most broker-dealer transitions” in securities is one technique to do this.The shorter settlement involves switching from a T+2 (two business day) to a T+1 (one business day) settlement time. The changes, according to the Commission, are intended to reduce “credit, market, and liquidity” risks in transactions.

This might be a huge gain for day traders, particularly those with smaller accounts who don’t qualify as “day traders.” Trading options is one of the few strategies to accomplish a T+1 settlement.
However, options have a higher volatility and numerous other elements, such as time decay, that work against them. With a planned T+1 settlement for securities deals, investors wishing to get into the market might do so considerably more quickly.

The SEC’s document explains what this means for “self-directed” or retail traders. Recent events, in particular, motivated these decisions, according to the white paper:

“Accelerating Time to Settlement” and “Settlement Optimization.”59 Among other things, the DTCC-owned clearing agencies have been exploring steps to modify their settlement process to be more efficient, such as by introducing new algorithms to position more transactions for settlement during the “night cycle” process (which currently begins in the evening of T+1) to reduce the need for activity on the day of settlement. Portions of these two initiatives have been submitted to the Commission and approved as proposed rule changes.”

In addition, the SEC’s document discussed: “More recently, periods of the increased market volatility—first in March 2020 following the outbreak of the COVID-19 pandemic, and again in January 2021 following heightened interest in certain “meme” stocks—highlighted the significance of the settlement cycle to the calculation of financial exposures and exposed potential risks to the stability of the U.S. securities market.”

The DTCC’s February 2021 document discussed how speeding up settlement beyond T+2 may “provide considerable benefits” to market players, which sparked this debate.
The DTCC predicted that a T+1 settlement strategy would be implemented in the second half of 2023, and that this form of settlement cycle would reduce the volatility of individual margin needs by “up to” 41%.

When it comes to penny stock investing, everyday patterns change swiftly. As a result, a shorter time to clear might provide market players with opportunities to be more systematic in their approach. The DTCC, the Securities Industry and Financial Markets Association, and an Industry Steering Committee released a T+1 Report late last year describing the proposed transition to a T+1 standard by 2024’s second quarter. Furthermore, an Industry Working Group looked at the possibility of a T+0 settlement. While this may be at the bottom of the priority list, it is still being discussed. Is it possible that traders will have a 0 settlement timescale for deals in the future?

Summary

The Securities and Exchange Commission (SEC) is considering rules that would reduce the usual settlement cycle for most broker-dealer transactions from two to one business day following the trade date (T+1).
In order to protect investors, minimize risk, and improve operational efficiency, the SEC proposes additional standards for broker-dealers, investment advisors, and certain clearing agencies to execute institutional trades.
Compliance with a T+1 standard settlement cycle would be needed by March 31, 2024 if the bill is passed. The SEC is also considering whether a same-day standard settlement cycle (i.e., settlement no later than the end of the trading date, or T+0) should be required.

Tag: trading

Quarter – Q1, Q2, Q3, Q4

The SEC’s new plan might be a significant gain for day traders