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Explaining settlement fails

Author

Listed:
  • Michael J. Fleming
  • Kenneth D. Garbade

Abstract

The Federal Reserve now makes available current and historical data on trades in U.S. Treasury and other securities that fail to settle as scheduled. An analysis of the data reveals substantial variation in the frequency of fails over the 1990-2004 period. It also suggests that surges in fails sometimes result from operational disruptions, but often reflect market participants' insufficient incentive to avoid failing.

Suggested Citation

  • Michael J. Fleming & Kenneth D. Garbade, 2005. "Explaining settlement fails," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 11(Sep).
  • Handle: RePEc:fip:fednci:y:2005:i:sep:n:v.11no.9
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    References listed on IDEAS

    as
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    2. Michael J. Fleming, 2001. "Financial market implications of the federal debt paydown," Staff Reports 120, Federal Reserve Bank of New York.
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    7. Frank M. Keane, 1996. "Repo rate patterns for new Treasury notes," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 2(Sep).
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    9. Michael J. Fleming & Kenneth D. Garbade, 2002. "When the back office moved to the front burner: settlement fails in the treasury market after 9/11," Economic Policy Review, Federal Reserve Bank of New York, vol. 8(Nov), pages 35-57.
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    Citations

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    Cited by:

    1. Jonathan Chiu & Thorsten V Koeppl, 2019. "Blockchain-Based Settlement for Asset Trading," Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1716-1753.
    2. Ilhyock Shim & Goetz von Peter, 2007. "Distress selling and asset market feedback," BIS Working Papers 229, Bank for International Settlements.
    3. Fujiki, Hiroshi & Green, Edward J. & Yamazaki, Akira, 2008. "Incentive efficient risk sharing in a settlement mechanism," Journal of Economic Theory, Elsevier, vol. 142(1), pages 178-195, September.
    4. Fukai, Hiroki, 2021. "Optimal interventions on strategic fails in repo markets," MPRA Paper 106090, University Library of Munich, Germany.
    5. Piero Gottardi & Vincent Maurin & Cyril Monnet, 2019. "A theory of repurchase agreements, collateral re-use, and repo intermediation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 33, pages 30-56, July.
    6. Shengxing Zhang, 2014. "Collateral Risk, Repo Rollover and Shadow Banking," 2014 Meeting Papers 562, Society for Economic Dynamics.
    7. Corradin, Stefano & Maddaloni, Angela, 2020. "The importance of being special: Repo markets during the crisis," Journal of Financial Economics, Elsevier, vol. 137(2), pages 392-429.
    8. Hajime Tomura, 2012. "On the Existence and Fragility of Repo Markets," Staff Working Papers 12-17, Bank of Canada.
    9. Rydqvist, Kristian & Wu, Mark, 2016. "Pre-auction inventory and bidding behavior: Evidence from Canadian Treasury auctions," Journal of Financial Markets, Elsevier, vol. 30(C), pages 78-102.
    10. Morten L. Bech & Elizabeth C. Klee & Viktors Stebunovs, 2012. "Arbitrage, liquidity and exit: the repo and federal funds markets before, during, and emerging from the financial crisis," Finance and Economics Discussion Series 2012-21, Board of Governors of the Federal Reserve System (U.S.).
    11. Mariana Khapko & Marius Zoican, 2020. "How Fast Should Trades Settle?," Management Science, INFORMS, vol. 66(10), pages 4573-4593, October.
    12. Kenneth D. Garbade & Matthew Rutherford, 2007. "Buybacks in Treasury cash and debt management," Staff Reports 304, Federal Reserve Bank of New York.
    13. Peter Hördahl & Michael R King, 2008. "Developments in repo markets during the financial turmoil," BIS Quarterly Review, Bank for International Settlements, December.

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