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

Talis Putnins

Published Paper Series from Finance Discipline Group, UTS Business School, University of Technology, Sydney

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)
Pages: 11 pages
Date: 2010-01-01
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Citations: View citations in EconPapers (8)

Published as: Putnins, T. 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 and Custody, 2(4), 340-350.

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