In finance, the term failure to deliver (or fails-to-deliver) typically refers to the inability of a party to deliver a financial instrument, or meet a contractual obligation. A typical example is the failure to deliver shares as part of a short transaction, for which Regulation SHO was designed as a remedy in the United States.[1] The Securities and Exchange Commission publishes "fails-to-deliver" data regarding transactions in the United States.[2]
Stocks bought and sold in transaction must be settled within 3 days. The buyer must deliver the cash and the seller the stock. If either party fails, a failure-to-deliver takes place.[3] Sometimes deliberate fail-to-delivers are used to profit from falling stocks, so that the stock can later be purchased at a lower price, then delivered, e.g. in the week of March 10, 2008, just before the failure of Bear Stearns, the fail-to-delivers increased by 10,800 percent.[3]
According to CNN in the US markets, fails-to-delivers had reached $200 billion a day in September 2011, but no similar data has been available for Europe.[4]