Explaining Settlement Fails

Abstract

The Federal Reserve now makes available current and historical data on trades in U.S. Treasury and other securities that fail to settle as scheduled. An analysis of the data reveals substantial variation in the frequency of fails over the 1990-2004 period. It also suggests that surges in fails sometimes result from operational disruptions, but often reflect market participants’ insufficient incentive to avoid failing. I n March 2004, the Federal Reserve Bank ofNew York began releasing statistics on trades ofU.S. Treasury and other securities that fail to settle on the date agreed upon by a buyer and seller. These statistics not only reveal the frequency of settlement fails over the past decade and a half, but also shed light on the causes of the fails. Since fails are thought to affect market liquidity when they persist at high levels, the new data merit close attention. In this edition of Current Issues, we examine the statis-tics on settlement fails for U.S. Treasury securities from July 1990—when the Fed began collecting the informa-

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 32 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.