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Naked short sales and fails-to-deliver: An overview of clearing and settlement procedures for stock trades in the USA

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  • Putniņš, Tālis J.

Abstract

This paper outlines the process of clearing and settlement for stock trades in the USA. It pays particular attention to what happens when the seller of a stock fails to deliver that stock at settlement and describes the mechanisms to resolve delivery failures. Fails-to-deliver can occur for a number of reasons, such as human error, administrative delays and the controversial practice of naked short selling. This paper helps understand the implications of naked short selling for trade counterparties and, more generally, the effects of naked short selling on the clearing and settlement system.

Suggested Citation

  • Putniņš, Tālis J., 2010. "Naked short sales and fails-to-deliver: An overview of clearing and settlement procedures for stock trades in the USA," Journal of Securities Operations & Custody, Henry Stewart Publications, vol. 2(4), pages 340-350, January.
    • Handle: RePEc:aza:jsoc00:y:2010:v:2:i:4:p:340-350
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    More about this item

    Keywords

    clearing; settlement; fail-to-deliver; naked short selling; National Securities Clearing Corporation (NSCC); Depository Trust Company (DTC).;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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