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Securities settlement fails network and buy‑in strategies

Author

Listed:
  • Gurrola-Perez, Pedro

    (Bank of England)

  • He, Jieshuang

    (The Chinese University of Hong Kong)

  • Harper, Gary

    (Bank of England)

Abstract

In the context of securities settlement, a trade is said to fail if on the settlement date either the seller does not deliver the securities or the buyer does not deliver funds. Settlement fails may have consequences for the parties directly involved and for the system as a whole. Chains of fails, for example, could lead to gridlock situations and large volume of fails can affect the liquidity and smooth functioning of financial markets. In this paper, we consider UK government bonds (gilts) and UK equities settlement data to examine the determinants of settlement fails and to explore the network characteristics of chains of settlement fails with the aim of identifying an optimal strategy to conduct a buy‑in process that could resolve cascades of fails.

Suggested Citation

  • Gurrola-Perez, Pedro & He, Jieshuang & Harper, Gary, 2019. "Securities settlement fails network and buy‑in strategies," Bank of England working papers 821, Bank of England.
    • Handle: RePEc:boe:boeewp:0821
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Settlement; post-trade process; settlement discipline; cascade effects; buy-in;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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