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

Henry Stewart Publications
Publication Type:
Journal Article
Journal of Securities Operations and Custody, 2010, 2 (4), pp. 340 - 350
Issue Date:
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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.
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