Fail

A A A

DEFINITION

In common trading terms, if a seller does not deliver securities or a buyer does not pay owed funds by the settlement date, then the transaction is said to fail. In a stock exchange, this occurs if a stockbroker does not deliver or receive securities, within a specified time after a security sale or a security purchase. When a seller cannot deliver the contracted securities, this is called a short fail. If a buyer is unable to pay for the securities, this is called a long fail.

INVESTOPEDIA EXPLAINS

Presently, firms have three days after the date of a trade to settle stock transactions. Within this time frame, securities and cash must be delivered to the clearing house for settlement. If firms are unable to meet this deadline, a fail will occur. Settlement requirements for stock, options, futures contracts, forwards and fixed-income securities differ.


Fail is also used as a bank term when a bank is unable to pay its debt to other banks. The inability of one bank to pay its debt to other banks in interbank fund transfer systems, can potentially lead to a domino effect, causing several banks to become insolvent.




RELATED TERMS
  1. Forward Contract

    A customized contract between two parties to buy or sell an asset at a specified ...
  2. Aged Fail

    A contract between two broker-dealers that has not been settled within 30 days ...
  3. Clearing House

    An agency or separate corporation of a futures exchange responsible for settling ...
  4. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments ...
  5. Futures Contract

    A contractual agreement, generally made on the trading floor of a futures exchange, ...
  6. Option

    A financial derivative that represents a contract sold by one party (option ...
  7. Trade Date

    The month, day and year that an order is executed in the market. The trade date ...
  8. Securities And Exchange Commission ...

    A government commission created by Congress to regulate the securities markets ...
  9. Settlement Date

    1. The date by which an executed security trade must be settled. That is, the ...
  10. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank holding companies ...
Related Articles
  1. Principal Trading and Agency Trading
    Investing Basics

    Principal Trading and Agency Trading

  2. Understanding Order Execution
    Investing Basics

    Understanding Order Execution

  3. Options Basics Tutorial
    Options & Futures

    Options Basics Tutorial

  4. Do I own a stock as of the trade date ...
    Options & Futures

    Do I own a stock as of the trade date ...

  5. Bond Basics Tutorial
    Retirement

    Bond Basics Tutorial

  6. Futures Fundamentals
    Insurance

    Futures Fundamentals

  7. Selling Premium As Small Caps Play Catch ...
    Options & Futures

    Selling Premium As Small Caps Play Catch ...

  8. What's the best way to play backwardation ...
    Active Trading Fundamentals

    What's the best way to play backwardation ...

  9. The Role Of Speculators In The Commodity ...
    Investing Basics

    The Role Of Speculators In The Commodity ...

  10. Trade Like A Hedge Fund Master
    Options & Futures

    Trade Like A Hedge Fund Master

comments powered by Disqus
Hot Definitions
  1. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  2. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  3. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  4. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  5. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  6. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
Trading Center