Naked Short Sales and Fails to Deliver: An Overview of Clearing and Settlement Procedures for Stock Trades in the US

Journal of Securities Operations and Custody, Forthcoming

17 Pages Posted: 7 Mar 2010  

Tālis J. Putniņš

University of Technology Sydney - UTS Business School; Stockholm School of Economics in Riga; Financial Research Network (FIRN)

Date Written: October 27, 2009

Abstract

This article outlines the process of clearing and settlement for stock trades in the US. 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 article 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)

Suggested Citation

Putniņš, Tālis J., Naked Short Sales and Fails to Deliver: An Overview of Clearing and Settlement Procedures for Stock Trades in the US (October 27, 2009). Journal of Securities Operations and Custody, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1516911

Talis J. Putnins (Contact Author)

University of Technology Sydney - UTS Business School ( email )

PO Box 123
Broadway
Sydney
Australia
+61 2 9514 3088 (Phone)

Stockholm School of Economics in Riga ( email )

Strelnieku Iela 4a
Riga, LV1010
Latvia
+371 67015841 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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