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

Tālis J. Putniņš

Journal of Securities Operations & Custody, 2010, vol. 2, issue 4, 340-350

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.

Keywords: clearing; settlement; fail-to-deliver; naked short selling; National Securities Clearing Corporation (NSCC); Depository Trust Company (DTC). (search for similar items in EconPapers)
JEL-codes: E5 G2 K22 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:aza:jsoc00:y:2010:v:2:i:4:p:340-350

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