Key legal issues in English law in debt capital markets—fungibility

Published by a LexisNexis Banking & Finance expert
Practice notes

Key legal issues in English law in debt capital markets—fungibility

Published by a LexisNexis Banking & Finance expert

Practice notes
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What does this Practice Note cover?

This Practice Note explains the concept of fungibility and its practical relevance to additional issuances of debt securities.

When are debt securities fungible?

Debt securities and other assets are fungible if they are substantially indistinguishable from one another and are interchangeable for trading purposes.

Fungibility is a basic characteristic of debt securities issued on the same date and forming a single series. They will invariably be issued on identical terms and interchangeable for all purposes. When the securities are traded, the seller can settle the trade by delivering the traded nominal amount of the securities, without any requirement to deliver any particular individual securities. If this were not the case, trading the securities would be practically impossible.

For information on trading debt securities, see Practice Note: UK Debt securities—trading, settlement and custody.

Fungibility was a significant question for securities issued on the same date and forming a single series in the past, when debt securities were issued in definitive bearer form—each security was an

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Jurisdiction(s):
United Kingdom
Key definition:
Fungibility definition
What does Fungibility mean?

Nuclear materials are considered fungible on the basis they are mutually interchangeable. In practice this means that enriched uranium produced for a customer by a company providing enrichment services will not necessarily be derived from the actual uranium feedstock the customer in question originally supplied to the enricher - as long as the quantity of enriched uranium supplied and of course its quality, match what was originally agreed between the parties.

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